March 12, 2018 / 2:34 PM / 5 months ago

CEE MARKETS-Dinar leads fall on CPI decline, central bank selling

    * Serbian CPI falls, triggers central bank rate cut talk
    * Zloty retreats though central bank sees it strengthening

 (Recasts with Serbian inflation fall, comments)
    By Sandor Peto and Aleksandar Vasovic
    BUDAPEST/Belgrade, March 12 (Reuters) - The dinar led an
easing of Central European currencies on Monday as a fall in
Serbia's inflation triggered expectations for an interest rate
cut by the central bank.
    The bank also continued to sell the currency in the market,
which bucked the weakening trend of other units in the region
last month, setting 3-and-1/2-month highs.
    Other currencies eased last month amid concern that global
inflation and interest rates would rise, while the dinar was
buoyed partly by demand at Serbian government bond auctions.
    Serbian data released on Monday showed a fall in annual
inflation to 1.5 percent in February from January's 1.9 percent.
 
    The dinar traded at 118 against the euro at 1335
GMT, weaker by 0.2 percent from Friday.
    "Such a strong dinar and low inflation are sure indicators
of a rate cut," one Belgrade-based dealer said.
    Even before the figures, analysts predicted that a fall in
inflation would fuel demand at an auction of 5-year government
bonds on Tuesday.
    The data repeated a similar, though smaller, fall in Czech
and Hungarian inflation.
    Poland's central bank (NBP) cut its own inflation forecasts
last week.
    The zloty set its weakest levels since the middle of
December last week, after NBP Governor Adam Glapinski said he
saw no reason to start to lift record-low interest rates until
the end of 2020.
    The currency firmed slightly early on Monday, but retreated
behind the 4.2 line against the euro later, to trade at 4.2018,
down 0.2 percent.
    Polish forward rate agreements have priced in an interest
rate hike of about 18 basis point in the next 12 months, less
than the NBP's standard 25 basis points.
    Analysts said Glapinski's forecast of no rise for years was
not set in stone and could change if inflation started to rise.
    The NBP also said in its inflation report that the zloty
could strengthen.
    A stronger zloty makes imports cheaper, and Poland reported
a 0.5 billion euro trade deficit for January on Monday. 
    But the trade gap is much less of a worry in Poland than in
Romania where it has been boosted by surging wages.
    The deficit in Romania, a much smaller economy than Poland,
widened by roughly a third on the year in January to 775 million
euros. A likely rise in inflation would probably
lead to further central bank rate hikes, analysts said.        
    Romanian stocks led a rise in the region, driven by
a 4 percent jump in the shares of lender BRD Groupe Societe
Generale, after it proposed a dividend payment.

    
            CEE       SNAPSHOT   AT                         
            MARKETS             1435 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4480   25.4700    +0.09%    +0.37%
 crown      >                                       
 Hungary    <EURHUF=  311.9500  311.5800    -0.12%    -0.33%
 forint     >                                       
 Polish     <EURPLN=    4.2018    4.1937    -0.19%    -0.61%
 zloty      >                                       
 Romanian   <EURRON=    4.6622    4.6570    -0.11%    +0.38%
 leu        >                                       
 Croatian   <EURHRK=    7.4460    7.4375    -0.11%    -0.21%
 kuna       >                                       
 Serbian    <EURRSD=  118.0000  117.7900    -0.18%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1129.50  1123.600    +0.53%    +4.76%
                                       0            
 Budapest             38801.84  38411.50    +1.02%    -1.46%
 Warsaw                2367.03   2354.54    +0.53%    -3.83%
 Bucharest             8575.79   8477.18    +1.16%   +10.60%
 Ljubljana  <.SBITOP    817.83    818.45    -0.08%    +1.42%
            >                                       
 Zagreb                1846.46   1857.70    -0.61%    +0.19%
 Belgrade   <.BELEX1    739.38    741.06    -0.23%    -2.69%
            5>                                      
 Sofia                  681.30    685.86    -0.66%    +0.57%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.8170   -0.0150   +138bps     +0bps
            R>                                      
   5-year   <CZ5YT=R    1.2860   -0.0010   +128bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.9390   -0.0120   +131bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5810   -0.0080   +214bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.4920   -0.0230   +249bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.2880   -0.0060   +266bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.06      1.22      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.74      1.76      1.80      1.71
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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