October 31, 2019 / 10:35 AM / 7 months ago

CEE MARKETS-Currencies steady after Fed, region's central banks keep stable rates outlook

    By Krisztina  Than and Jason Hovet
    BUDAPEST/PRAGUE, Oct 31 (Reuters) - Central European
currencies were broadly steady versus the euro on Thursday after
the U.S. Federal Reserve rate cut and comments which dented the
dollar and boosted risk sentiment globally. 
    Against the backdrop of monetary policy loosening by the
world's largest central banks, central European rate-setters
have generally adopted a wait-and-see mode, keeping rates on
hold as the region has produced strong economic growth despite a
slowdown in the eurozone, its main trading partner.
    They look likely to maintain this stance even though some
Czech policy makers have spoken in favour of rate hikes.  
    A blast of Czech central banker comments came on Wednesday
ahead of the central bank's policy meeting next week, with most
backing a view that rate stability will be maintained even as
debate continues on a possible increase.
    Governor Jiri Rusnok said the domestic economy was far from
recession and balancing contradictory foreign and domestic
factors implied rate stability.
    Ceska Sporitelna economist Jiri Polansky said: "We expect
next year inflation will stay above 2% and the bank will discuss
the possibility of a hike even in 2020. But given the situation
in the world economy and weak German data, they will wait and
see how the situation evolves." 
    The state of Brexit and U.S.-China trade talks will be key,
Polansky added.
    Vice-Governor Marek Mora, one of two voting in the minority
in September for a hike, was quoted by Lidove Noviny as saying
he would probably vote for stability this time.
    Central banker Oldrich Dedek told Reuters in an interview
this week nothing had changed for him since the last meeting
when he backed stable rates, adding debate on a cut was still
far away.
    In Hungary, the central bank has maintained its
accommodative stance and has repeatedly said downward inflation
risks have increased.
    Poland's flash CPI stood at 2.5% in October, the statistics
office said earlier on Thursday, in line with expectations.

    "The data will not have an impact on the Monetary Policy
Council (MCP) decision on interest rates next week. MPC has
consequently announced a long-term stabilization in the cost of
money," said Monika Kurtek, chief economist at Bank Pocztowy,
said in a note.
    At 0847 GMT, the crown was flat versus the euro,
while the Hungarian forint was 0.1% weaker, along with
the Polish zloty. 
    "The Fed rate cut is good for emerging market currencies but
for the time being we do not expect a significant forint
strengthening," brokerage Equilor said.
    Stock markets fell across the region, in a correction after
significant gains in recent days.
                  CEE      SNAPSH   AT                       
                  MARKETS  OT      1047             
                           Latest  Previo  Daily    Change
                           bid     close   change   in 2019
 EURCZK=  Czech   <EURCZK  25.498  25.505   +0.03%     +0.82%
          crown   =>            0       5           
 EURHUF=  Hungar  <EURHUF  329.90  329.55   -0.11%     -2.67%
          y       =>           00      00           
 EURPLN=  Polish  <EURPLN  4.2620  4.2597   -0.06%     +0.65%
          zloty   =>                                
 EURRON=  Romani  <EURRON  4.7570  4.7585   +0.03%     -2.17%
          an leu  =>                                
 EURHRK=  Croati  <EURHRK  7.4550  7.4622   +0.10%     -0.60%
          an      =>                                
 EURRSD=  Serbia  <EURRSD  117.37  117.49   +0.10%     +0.79%
          n       =>           00      00           
          Note:   calculated from          1800              
          daily                            CET      
                           Latest  Previo  Daily    Change
                                   close   change   in 2019
 .PX      Prague           1056.4  1061.8   -0.51%     +7.08%
                                3     800           
 .BUX     Budape           42231.  42796.   -1.32%     +7.90%
          st                   83      70           
 .WIG20   Warsaw  <.WIG20  2204.5  2227.3   -1.03%     -3.17%
                  >             0       8           
 .BETI    Buchar           9630.7  9646.8   -0.17%    +30.43%
          est                   7       7           
 .SBITOP  Ljublj  <.SBITO  853.56  853.56   +0.00%     +6.13%
          ana     P>                                
 .CRBEX   Zagreb  <.CRBEX  1997.2  2002.2   -0.25%    +14.21%
                  >             3       6           
 .BELEX1  Belgra  <.BELEX  748.68  749.79   -0.15%     -1.71%
 5        de      15>                               
 .SOFIX   Sofia   <.SOFIX  556.04  555.86   +0.03%     -6.46%
                           Yield   Yield   Spread   Daily
                           (bid)   change  vs Bund  change in
          Czech                                     spread
 CZ2YT=R          <CZ2YT=  1.2850  0.0460   +194bp      +7bps
 R        2-year  RR>                            s  
 CZ5YT=R          <CZ5YT=  1.0750  -0.060   +172bp      -2bps
 R        5-year  RR>                   0        s  
 CZ10YT=          <CZ10YT  1.4080  -0.003   +182bp      +5bps
 RR       10-yea  =RR>                  0        s  
 PL2YT=R          <PL2YT=  1.4400  -0.025   +210bp      +0bps
 R        2-year  RR>                   0        s  
 PL5YT=R          <PL5YT=  1.7160  -0.047   +236bp      -1bps
 R        5-year  RR>                   0        s  
 PL10YT=          <PL10YT  1.9890  -0.029   +240bp      +2bps
 RR       10-yea  =RR>                  0        s  
                  FORWARD  RATE    AGREEM                    
                           3x6     6x9     9x12     3M
          Czech   <CZKFRA    2.25    2.24     2.12       2.18
          Rep     ><PRIBO                           
          Hungar  <HUFFRA    0.27    0.31     0.34       0.20
          y       ><BUBOR                           
          Poland  <PLNFRA    1.73    1.71     1.68       1.71
          Note:   are for ask                                
          FRA     prices                            

 (Reporting by Krisztina Than
Additional reporting by Agnieszka Barteczko in Warsaw and Jason
Hovet in Prague
Editing by David Holmes)
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