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Crown firms after data, Serbia holds rates, buying dinar


Reuters

By Sandor Peto and Robert Muller

BUDAPEST/PRAGUE, Dec 7 (Reuters) - The crown rebounded from 3-week lows and demand for Czech Treasury bills surged at an auction on Thursday as new Czech data underpinned healthy and balanced economic expansion.

Czechs were a leader of Central Europe's robust growth in the third quarter, with 5 percent annual output rise.

The crown, with 5.5 percent gain versus the euro so far this year, became the world's top-performing currency in 2017, boosted by the strong economy and two central bank (CNB) rate hikes since August.

It firmed to 25.59 by 1416 GMT, after reaching a 3-week low of 25.696 on Wednesday amid doubts if the CNB continues to raise rates at its meeting next week.

Investments could rise further next year, said Viktor Zeisel, analyst at Komercni Banka.

"We expect a (CNB) rate hike in each quarter of the next year," he added.

A worsening labour shortage forces firms to invest in efficiency and automation, Erste analyst Jiri Polansky said.

The output data, though it heralds higher wage growth, will not increase pressure on the CNB to hike rates because a rise in productivity-enhancing investment moderates inflation, he added.

Analysts expect the crown to lead the forint and the zloty higher next year.

Hoping for further gains, foreigners keep the huge amount of crown positions built before the CNB removed a cap at 27 against the euro in April.

Demand surged at an auction of 19-week Czech Treasury bills, pushing the yield deeper into the negative, to -0.8 percent.

In Budapest, the past months' slide in government bond yields to record lows did not curb appetite either.

Thursday's Hungarian bond auctions drew solid demand, just like Bucharest's 3-year bond tender.

Romanian bond prices got cheap in the past months, sliding due to worries that robust growth, which reached 8.8 percent in annual terms in the third quarter, could boost inflation.

A key growth driver in the region is a surge in wages. Workers had quit by the millions, moving West.

Croatia on Thursday raised its minimum wage and its quota for foreign workers.

Inflation is less of a worry in Serbia, but its central bank kept its 3.5 percent main rate, the highest in the region, on hold on Thursday, fearing that a likely Federal Reserve rate hike could weigh on the dinar and domestic bonds.

Meanwhile, it continued to sell euros in the market to stem a weakening of the dinar.

CEE MARKETS

SNAPSHOT

AT 1516 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2017

Czech crown

25.5900

25.6195

+0.12%

5.54%

Hungary forint

314.8800

314.4650

-0.13%

-1.92%

Polish zloty

4.2140

4.2140

+0.00%

4.51%

Romanian leu

4.6340

4.6291

-0.11%

-2.14%

Croatian kuna

7.5440

7.5472

+0.04%

0.15%

Serbian dinar

119.6500

119.4900

-0.13%

3.09%

Note: daily change

calculated from

previous

close at

1800 CET

STOCKS

Latest

Previous

Daily

Change

close

change

in 2017

Prague

1055.99

1053.15

+0.27%

+14.58%

Budapest

38181.17

37591.53

+1.57%

+19.30%

Warsaw

2386.06

2394.67

-0.36%

+22.49%

Bucharest

7656.54

7670.16

-0.18%

+8.07%

Ljubljana

779.11

773.03

+0.79%

+8.57%

Zagreb

1856.12

1853.23

+0.16%

-6.95%

Belgrade

742.65

743.97

-0.18%

+3.52%

Sofia

665.36

666.31

-0.14%

+13.46%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

0.075

0.072

+083bps

+8bps

5-year

0.807

0.021

+119bps

+2bps

10-year

1.42

-0.001

+112bps

+0bps

Poland

2-year

1.656

-0.005

+241bps

+0bps

5-year

2.651

0.015

+303bps

+2bps

10-year

3.244

-0.002

+294bps

+0bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

0.99

1.19

1.3

0

Hungary

0.03

0.06

0.1

0.03

Poland

1.77

1.82

1.92

1.73

Note: FRA quotes

are for ask prices

**************************************************************




This article appears in: Stocks , World Markets , Politics


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