November 19, 2019 / 11:02 AM / 21 days ago

CEE MARKETS-Forint regains ground before rate meeting, leads FX higher

    PRAGUE, Nov 19 (Reuters) - Hungary's forint firmed 0.2%
against the euro on Tuesday, ending a three-day slide and
supported by expectations Europe's most dovish central bank will
keep interest rates steady and by a Moody's forecast on economic
growth.
    Other central European currencies were also firmer while
stocks were mixed as Prague and Budapest rose by up
to half a percent and Warsaw dropped.
    Given rising inflation, analysts see decreasing chances the
Hungarian central bank will take any easing steps at its meeting
on Tuesday.
    The bank itself has said any necessary adjustment would be
implemented through changes in its overnight deposit rate, which
is at -0.05%, or tools designed to adjust market liquidity. Its
base rate is at 0.9%, the lowest in central Europe.
    With strong economies still adding to inflationary
pressures, central banks in the region have not rushed into
easing policy like major central banks from the European Central
Bank to the U.S. Federal Reserve. In the Czech case, rate
setters are still debating whether tighter policy is needed.
    Hungary's policy stance has weighed on the forint along with
weak global sentiment as Britain's uncertain departure from the
European Union and back-and-forth in the U.S.-China trade
dispute rattle investors.
    The forint nudged up to 334.90 to the euro on
Tuesday, snapping a three-day slide that had brought it to its
weakest since the end of September, when it hit an all-time low
of 336.28.
    "That (level) could serve as temporary respite," Erste
Investments said in a trade note.
    The forint found some support from a Moody's ratings agency
report saying Hungary's economic growth should remain robust in
2020 and 2021.    
    Other currencies also firmed with hopes remaining the United
States and China were moving closer to a trade deal. The Polish
zloty and the Czech crown gained 0.1%.
    Commerzbank said it expected the forint to stay under
pressure although at the moment investors were unwilling to test
the central bank's statement it has no exchange rate target with
global risk currently supportive.
    It said Hungary's low rate policy combined with its current
rates of price growth ran the risk of a possible inflation
overshoot, which could weigh on the forint going forward.
    
    

                                CEE MARKETS        SNAPSHOT    AT                        
                                                                 1121 CET                
                                                   CURRENCIES                            
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2019
 EURCZK=    Czech crown                            25.5550     25.5840         +0.11%    +0.59%
 EURHUF=    Hungary forint                         334.9000    335.5350        +0.19%    -4.13%
 EURPLN=    Polish zloty                           4.2914      4.2935          +0.05%    -0.04%
 EURRON=    Romanian leu                           4.7750      4.7754          +0.01%    -2.53%
 EURHRK=    Croatian kuna                          7.4400      7.4410          +0.01%    -0.40%
 EURRSD=    Serbian dinar                          117.3700    117.4300        +0.05%    +0.79%
            Note: daily change  calculated from                                1800 CET  
                                                                                         
                                                   Latest      Previous        Daily     Change
                                                               close           change    in 2019
 .PX        Prague                                 1081.92     1078.1800       +0.35%    +9.67%
 .BUX       Budapest                               43959.65    43867.73        +0.21%    +12.32%
 .WIG20     Warsaw                                 2221.03     2229.92         -0.40%    -2.44%
 .BETI      Bucharest                              9726.36     9724.93         +0.01%    +31.73%
 .SBITOP    Ljubljana                              883.16      883.56          -0.05%    +9.81%
 .CRBEX     Zagreb                                 1990.40     1988.09         +0.12%    +13.81%
 .BELEX15   Belgrade                               766.69      766.47          +0.03%    +0.66%
 .SOFIX     Sofia                                  554.96      555.77          -0.15%    -6.64%
                                                   BONDS                                 
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.4020      0.0280          +203bps   +2bps
 CZ5YT=RR   5-year                                 1.3000      0.0860          +189bps   +8bps
 CZ10YT=RR  10-year                                1.4880      -0.0130         +182bps   -2bps
            Poland                                                                       
 PL2YT=RR   2-year                                 1.4030      0.0020          +203bps   -1bps
 PL5YT=RR   5-year                                 1.8560      0.0330          +244bps   +3bps
 PL10YT=RR  10-year                                2.1320      0.0400          +246bps   +3bps
                                FORWARD            RATE        AGREEMENT                 
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.23        2.23            2.16      2.18
            Hungary                                0.25        0.30            0.34      0.19
            Poland                                 1.73        1.72            1.68      1.71
            Note: FRA quotes    are for ask prices                                       
            
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