January 15, 2020 / 10:12 AM / 7 months ago

CEE MARKETS-Czech crown extends 2020 rally, tests post-intervention high

    By Gergely Szakacs and Jason Hovet
    BUDAPEST/PRAGUE, Jan 15 (Reuters) - The crown
firmed against the euro on Wednesday, testing a multi-year high
and outperforming central European peers as markets weighed
chances of whether Czech interest rates could rise this year.
    The Czech National Bank has voted 5-2 at its last three
monetary policy meetings to keep rates stable, with the minority
wanting a hike, and is balancing domestic inflationary pressures
with uncertainties abroad affecting.
    Policymaker comments this week showed debate over tighter
policy was still alive, helping push the crown towards the key
25 mark versus the euro from a 23-month high scaled on Tuesday.
A spike in inflation, seen in data on Monday, has also boosted
the market.
    At 0929 GMT, the crown was 0.1% stronger at 25.124 per euro,
just off its highest level of 25.120 seen since the central bank
ended an intervention regime keeping the crown weak in 2017. 
    CSOB analysts said a break of that level would open space to
a test of the psychological 25 per euro level.
    "Continuing global optimism could help the crown move close
to 25 in the coming days. But we are staying more cautious with
the outlook for the whole year," CSOB said.
    Most other central European currencies were unchanged or a
tad weaker. The Czech unit is off to a blistering start, gaining
over 1% versus the euro in the first two weeks of the year.
    In contrast, the Hungarian forint, last year's
worst performer in the region due in part to the National Bank
of Hungary's loose policy stance, continued its struggles,
already shedding another 0.6% against the euro.
    The difference in policies was seen in central banker
comments. Czech central bank board member Vojtech Benda, a known
hike supporter, said on Wednesday the bank has room to raise
interest rates this year and it would be better to move sooner
than later.
    Vice-Governor Marek Mora, who voted in the minority for a
hike in September but has backed stable rates since then, also
said late on Monday he saw stable or mildly higher interest
rates this year as the most likely case.
    For the forint, there was little help from the Hungarian
central bank, which has repeatedly said it had no exchange rate
target and was only looking at long-term currency movements to
assess whether they affected inflation trends.
    While headline inflation rose to a seven-year-high in
December, the central bank's preferred measure of lasting price
trends ticked lower, further reducing the likelihood of any
shift away from its commitment to keep policy accommodative.
    After Tuesday's bounce to stronger levels, the forint
resumed easing on Wednesday, shedding 0.3% in morning trade.
    "The short-term trend is still pointing (to weakening),
especially as long as the EUR/HUF remains above short-term
moving averages," analysts at Erste Investment said in a note.
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1029              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  25.1240  25.1550   +0.12%   +1.23%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  333.150  332.220   -0.28%   -0.60%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.2247   4.2185   -0.15%   +0.75%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.7791   4.7805   +0.03%   +0.19%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.4460   7.4463   +0.00%   -0.01%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.600  117.570   -0.03%   -0.03%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
                            Latest   Previou  Daily    Change
                                     close    change   in 2020
 .PX     Prague             1137.04  1139.10   -0.18%   +1.92%
 .BUX    Budapest           45009.0  44960.3   +0.11%   -2.33%
                                  0        1           
 .WIG20  Warsaw    <.WIG20  2169.29  2182.96   -0.63%   +0.89%
 .BETI   Buchares           10048.2  10035.4   +0.13%   +0.71%
         t                        8        7           
 .SBITO  Ljubljan  <.SBITO   972.52   974.13   -0.17%   +5.04%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  2051.99  2052.42   -0.02%   +1.71%
 .BELEX  Belgrade  <.BELEX   794.15   801.82   -0.96%   -0.94%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   578.94   580.10   -0.20%   +1.90%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   1.7800   0.0670   +237bp    +7bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.5460  -0.0660   +205bp    -5bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.7010   0.0000   +190bp    +3bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   1.5130  -0.0250   +210bp    -2bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.9430  -0.0270   +244bp    -1bps
 RR                RR>                              s  
 PL10YT            <PL10YT   2.2750  -0.0030   +247bp    +2bps
 =RR     10-year   =RR>                             s  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     2.28     2.28     2.27     2.17
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     0.26     0.34     0.42     0.16
         Poland    <PLNFRA     1.75     1.76     1.78     1.71
         Note:     are for ask                                
         FRA       prices                              

 (Reporting by Gergely Szakacs in Budapest and Jason Hovet in
Editing by Giles Elgood)
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