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Crown rebounds after strong output data, Serbia seen holding rates


Reuters

By Sandor Peto and Robert Muller

BUDAPEST/PRAGUE, Dec 7 (Reuters) - The crown rebounded from 3-week lows on Thursday as October Czech industrial output and trade account figures 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 after the central bank (CNB) removed a cap on it in April, boosted by the strong economy and two CNB rate hikes since August

The currency reached a 3-week low of 25.696 on Wednesday amid doubts if the CNB continues to raise rates at its meeting next week, but firmed mildly to 25.617 by 1004 GMT on Thursday.

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.

The region's and the Czech Republic's 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.

A Reuters poll of analysts showed that the crown is seen leading the forint and the zloty higher next year.

Elsewhere, the dinar eased 0.1 percent to 119.65 against the euro ahead of the Serbian central bank's meeting where it is expected to keep the region's highest benchmark rate on hold at 3.5 percent.

It would not put further pressure on the dinar by cutting rates, on top of expectation that the Federal Reserve will hike rates next week, Raiffeisen analyst Stephan Imre said in a note.

That is relevant due to a high share of dollar investors in Belgrade's bond market, he said.

In Romania, an auction of 3-year papers is expected to draw healthy demand and see a cut-off yield near Wednesday's closing mid of 3.4 percent, ING analysts said in a note.

The bond originally launched in August has reached a historic high, along with other Romanian yields boosted by concerns that inflation will surge in the economy which grew 8.8 percent in annual terms in the third quarter.

The rise has revived interest among non-resident yield-hunters, Imre said.

In Warsaw, the zloty firmed slightly.

Top officials of the ruling party PiS, meeting after markets close, are expected to replace Prime Minister Beata Szydlo. The likely replacement is her deputy, Mateusz Morawiecki, who would be a market-friendly choice, analysts said.

CEE MARKETS

SNAPSHOT

AT 1104 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2017

Czech crown

25.6170

25.6195

+0.01%

5.43%

Hungary forint

314.6000

314.4650

-0.04%

-1.84%

Polish zloty

4.2110

4.2140

+0.07%

4.58%

Romanian leu

4.6325

4.6291

-0.07%

-2.10%

Croatian kuna

7.5370

7.5472

+0.14%

0.24%

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

1056.08

1053.15

+0.28%

+14.59%

Budapest

37851.81

37591.53

+0.69%

+18.28%

Warsaw

2406.49

2394.67

+0.49%

+23.54%

Bucharest

7672.31

7670.16

+0.03%

+8.29%

Ljubljana

779.15

773.03

+0.79%

+8.58%

Zagreb

1863.59

1853.23

+0.56%

-6.58%

Belgrade

743.97

743.97

+0.00%

+3.71%

Sofia

667.41

666.31

+0.17%

+13.81%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

0.075

0.072

+082bps

+7bps

5-year

0.801

0.015

+118bps

+2bps

10-year

1.42

-0.001

+112bps

+0bps

Poland

2-year

1.656

0.006

+240bps

+0bps

5-year

2.657

0.023

+304bps

+2bps

10-year

3.258

0.004

+295bps

+0bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

0.99

1.19

1.31

0

Hungary

0.085

0.135

0.17

0.03

Poland

1.773

1.818

1.919

1.73

Note: FRA quotes

are for ask prices

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




This article appears in: Stocks , World Markets , Politics


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