CEE MARKETS-Czech crown steadies as investors ponder rate hike chances
* Investors hold breath ahead of Czech rate meet on Thursday
* Czech rate hike would be first in region since 2013
* Hungary central bank keeps dovish stance
* Forint retreats from highs on central bank minutes
By Krisztina Than and Jason Hovet
BUDAPEST/PRAGUE, Aug 2 (Reuters) - The crown steadied on
Wednesday near one-month lows reached in overnight trade against
the euro due to positioning ahead of a likely interest rate hike
at the Czech central bank's (CNB (Other OTC: CNBW - news) ) meeting on Thursday.
A rise in the Czech benchmark rate, which is currently the
lowest in Central Europe at 0.05 percent, would be the first
tightening in the region since 2013 and the first in Prague for
almost a decade.
Other central banks in the region are still in easing mode.
The National Bank of Hungary (NBH) kept its dovish message
in the minutes of its July policy meeting published on
Wednesday, still flagging the possibility of more monetary
easing with unconventional tools if necessary.
This helped push the forint a bit weaker in the afternoon
and at 1250 GMT it was down 0.3 percent from Tuesday.
"The NBH published its minutes which did not contain much
news, but was fairly dovish," a Budapest-based trader said,
adding that this contributed to a retreat in the forint to
levels around 304 from 303 hit on Tuesday. That was the
strongest the forint had been since the second quarter of 2015.
The forint has also firmed to multi-year highs
against the dollar this week.
A rate increase in the Czech Republic could boost the forint
again to test the level of 303 versus the euro, the
Budapest-based trader said.
"But that (Czech rate hike) will not have an impact on the
Hungarian central bank in terms of policy," he said, referring
to the bank's pledge to keep interest rates steady for a
sustained period. Analysts say Hungarian rates could remain
unchanged this year and next.
But there are many in the market who believe a Czech rate
hike still cannot be taken for granted, as they say loose
European Central Bank (ECB) policy will prevent the bank
tightening this month.
On the other hand, solid economic growth of around 3 percent
expected for this year and next and inflation above target,
coupled with wages and house prices soaring, are good arguments
for a rate increase.
"Front end FRAs did not move much, we still seem to be
having a hike priced in only sometimes in November, the curve
should catch up if CNB delivers the hike tomorrow," Komercni
Banka said in a note on Wednesday.
"EURCZK gets weaker again, 26.150 (versus the euro) unlikely
to mean much for CNB decision making tomorrow, but a weaker
currency is certainly an inflationary factor should there be a
larger correction."
The crown was trading at around 26.125 versus the
euro, up a shade from Tuesday but near one-month lows.
Elsewhere, currencies were rangebound while stock markets
traded in negative territory, with Bucharest and Budapest
bucking the trend.
The Hungarian stock market was boosted by a 1.7 percent rise
in OTP Bank (LSE: 0M69.L - news) shares and a 0.8 percent rise in
pharmaceuticals firm Richter.
Magyar Telekom, which will report second-quarter
results at 1600 GMT, was 0.2 percent higher.
CEE MARKETS SNAPSH AT 1450 CET
OT
CURRENCIES
Latest Previo Daily Change
us
bid close change in 2017
Czech crown 26.125 26.148 +0.09 3.38%
0 5 %
Hungary 304.25 303.42 -0.27% 1.50%
forint 00 50
Polish zloty 4.2550 4.2528 -0.05% 3.50%
Romanian leu 4.5610 4.5571 -0.09% -0.57%
Croatian 7.4060 7.4095 +0.05 2.01%
kuna %
Serbian 119.85 119.95 +0.08 2.92%
dinar 00 00 %
Note (Stockholm: NOTE.ST - news) : daily calculated previo close 1800
change from us at CET
STOCKS
Latest Previo Daily Change
us
close change in 2017
Prague 1011.8 1014.9 -0.30% +9.79%
6 5
Budapest 35999. 35786. +0.60 +12.49%
95 52 %
Warsaw 2381.8 2386.4 -0.19% +22.28%
3 0
Bucharest 8300.1 8285.1 +0.18 +17.15%
0 6 %
Ljubljana 809.85 818.74 -1.09% +12.86%
Zagreb 1887.4 1889.9 -0.13% -5.38%
2 7
Belgrade 707.17 724.22 -2.35% -1.42%
Sofia 713.10 713.30 -0.03% +21.60%
BONDS
Yield Yield Spread Daily
(bid) change vs change in
Bund
Czech spread
Republic
2-year 0 0.077 +070b +8bps
ps
5-year 0.068 0.049 +028b +5bps
ps
10-year 0.897 0.017 +040b +1bps
ps
Poland
2-year 1.827 0.029 +252b +3bps
ps
5-year 2.701 0.001 +292b +0bps
ps
10-year 3.361 0 +286b -1bps
ps
FORWARD RATE AGREEMENT
3x6 6x9 9x12 3M
interbank
Czech Rep IBOR=> Hungary BOR=> Poland (WI 1.79 1.81 1.855 1.73 BOR=) Note: FRA are for ask quotes prices ************************************************************ ** (Additional reporting by Jason Hovet, writing by Krisztina Than; Editing by Andrew Heavens and Pritha Sarkar)