February 11, 2020 / 10:11 AM / 16 days ago

CEE MARKETS-Currencies gain as crown past key level, forint off record low

    PRAGUE, Feb 11 (Reuters) - The Hungarian forint stabilised off a record low on Tuesday and the
Czech crown swung to the strong side of a key psychological level as central Europe's currencies
edged higher due to a pick-up in risk appetite.
    A slowdown in the number of new coronavirus cases in China provided some relief although markets
stayed cautious, leaving gains in central European assets limited.
    The forint, after touching a record low of 339.20 to the euro at the end of last week,
pushed 0.1% higher to bid mid-morning at 337.65.
    The Hungarian currency is already down almost 2% this year and has gained little since the
central bank, the most dovish in the region, tightened liquidity on Monday afternoon by rejecting
bids at a weekly euro/forint swap tender.
    "Less liquidity has been having its effect in terms of doubling the three-month money market rate
from 0.16% to 0.32% between mid-January and now," Commerzbank analyst Tatha Ghose said in a note.
    "But the rise in interest rate is still far less than the acceleration in inflation ... hence,
even if one were to calculate the real interest rate using 3m Bubor, Hungary would still possess the
most negative real interest rate in the emerging market universe. 
    "For this reason, the forint exchange rate was unimpressed."
    The Czech crown has found support from the central bank after it raised its base
interest rate last week - the world's only policy hike so far in 2020.
    The move, likely the last in a 220-basis point tightening cycle going back to 2017, has widened
the rate differential to the euro zone. 
    Analysts and dealers say this will buoy the crown against global market fears in the near term.
The crown was up 0.3% at 24.955 per euro, on the strong side of the key 25 level.
    Analysts mostly expect a growth slowdown to weigh on the region's currencies this year as slack
from the euro zone bites economies that have been so far bolstered by domestic consumption.
    Raiffeisen said economic fears should "weigh on CEE currencies over the mid-term, not only via
the stronger USD channel acting as a systematic shock but also via the growth channel."
    However, Polish zloty investors cheered 2019 trade data out on Tuesday, showing a 5.5%
rise in exports. The currency gained 0.2% to 4.261 per euro.
    "Poland is resisting the slowdown abroad," PKO BP economist Marcin Czaplicki said.
    

                                CEE MARKETS        SNAPSHOT                              
                                                                                         
                                                   CURRENCIES                            
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2020
 EURCZK=    Czech crown                            24.9550     25.0410         +0.34%    +1.91%
 EURHUF=    Hungary forint                         337.6500    338.0650        +0.12%    -1.93%
 EURPLN=    Polish zloty                           4.2610      4.2708          +0.23%    -0.11%
 EURRON=    Romanian leu                           4.7685      4.7665          -0.04%    +0.42%
 EURHRK=    Croatian kuna                          7.4540      7.4543          +0.00%    -0.12%
 EURRSD=    Serbian dinar                          117.5300    117.5500        +0.02%    +0.03%
            Note: daily change  calculated from                                1800 CET  
                                                                                         
                                                   Latest      Previous        Daily     Change
                                                               close           change    in 2020
 .PX        Prague                                 1110.70     1111.1200       -0.04%    -0.44%
 .BUX       Budapest                               44401.03    44538.59        -0.31%    -3.65%
 .WIG20     Warsaw                                 2096.64     2092.89         +0.18%    -2.49%
 .BETI      Bucharest                              10010.34    10012.30        -0.02%    +0.33%
 .SBITOP    Ljubljana                              978.61      976.32          +0.23%    +5.70%
 .CRBEX     Zagreb                                 2021.51     2023.56         -0.10%    +0.20%
 .BELEX15   Belgrade                               811.11      812.78          -0.21%    +1.18%
 .SOFIX     Sofia                                  570.84      570.42          +0.07%    +0.48%
                                                                                         
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.8010      -0.0220         +244bps   -3bps
 CZ5YT=RR   5-year                                 1.5200      -0.1040         +212bps   -12bps
 CZ10YT=RR  10-year                                1.5110      -0.0400         +190bps   -6bps
            Poland                                                                       
 PL2YT=RR   2-year                                 1.5350      0.0040          +217bps   +0bps
 PL5YT=RR   5-year                                 1.7590      0.0110          +236bps   -1bps
 PL10YT=RR  10-year                                2.0890      0.0240          +248bps   +0bps
                                FORWARD                                                  
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.38        2.31            2.27      2.39
            Hungary                                0.45        0.53            0.62      0.32
            Poland                                 1.72        1.70            1.69      1.71
            Note: FRA quotes    are for ask prices                                       
            
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