CEE MARKETS-CEE currencies edge lower, all eyes on Fed

Credit: REUTERS/Peter Andrews

Central European currencies eased marginally on Wednesday in cautious trade ahead of the outcome of a U.S. Federal Reserve policy meeting, with little impact from ECB chief Mario Draghi's unexpectedly strong hints about more stimulus.

By Radu-Sorin Marinas

BUCHAREST, June 19 (Reuters) - Central European currencies eased marginally on Wednesday in cautious trade ahead of the outcome of a U.S. Federal Reserve policy meeting, with little impact from ECB chief Mario Draghi's unexpectedly strong hints about more stimulus.

The Fed, which concludes its latest policy meeting on Wednesday, is expected to leave interest rates on hold but flag whether it plans to cut rates later this year.

Traders say a lower path for U.S. interest rates and a weaker dollar would be generally positive for currencies in the European Union's emerging east.

"Emerging market currency traders patiently await the outcome of the US Fed's meeting later today. Indeed, US rates as well as the euro/dollar exchange rate are key systemic drivers for asset prices," analysts at Raiffeisen said.

If Fed comments confirm to investors that they have been too optimistic about the timing of U.S. rate cuts, the dollar may strengthen and U.S. bond yields rebound, potentially causing a weakening of Central European currencies and bonds.

A more hawkish than expected US stance, however, can lead to a significant sell-off in emerging currencies, said Raiffeisen.

ECB policymakers were divided on Tuesday after Draghi hinted at new stimulus measures that had yet to be discussed by the ECB's Governing Council.

Draghi told an ECB conference the central bank would ease policy again if inflation fails to accelerate, saying that fresh bond purchases, rate cuts or changes to the ECB's policy guidance had all been "raised and discussed" at a meeting of the ECB Governing Council less than two weeks ago.

The forint EURHUF= traded 0.17% down on the day by 0910 GMT, followed by the Polish zloty EURPLN= and Czech crown EURCZK= with 0.15% and 0.14% drops respectively. The Romanian leu EURRON= was flat at 4.7260 to the euro.

Czechs auction a euro-denominated domestic bond, with Komercni Banka trader Dalimil Vyskovsky saying that "with the Draghi message yesterday we expect demand to be strongish again despite the paper being issued under domestic law and thus limiting the range of investors that can subscribe."

CEE MARKETS

SNAPSHOT

AT 1157 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2019

Czech crown

EURCZK=

25.6390

25.6000

-0.15%

+0.27%

Hungary forint

EURHUF=

323.7000

323.2000

-0.15%

-0.81%

Polish zloty

EURPLN=

4.2683

4.2609

-0.17%

+0.50%

Romanian leu

EURRON=

4.7260

4.7228

-0.07%

-1.52%

Croatian kuna

EURHRK=

7.4050

7.4053

+0.00%

+0.07%

Serbian dinar

EURRSD=

117.8500

117.8900

+0.03%

+0.38%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2019

Prague

.PX

1057.67

1055.1800

+0.24%

+7.21%

Budapest

.BUX

40998.31

40922.41

+0.19%

+4.75%

Warsaw

.WIG20

2322.59

2325.16

-0.11%

+2.02%

Bucharest

.BETI

8570.74

8525.82

+0.53%

+16.08%

Ljubljana

.SBITOP

879.13

873.95

+0.59%

+9.31%

Zagreb

.CRBEX

1898.22

1899.99

-0.09%

+8.54%

Belgrade

.BELEX15

720.21

720.41

-0.03%

-5.45%

Sofia

.SOFIX

578.64

578.05

+0.10%

-2.66%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

CZ2YT=RR

1.5940

0.0410

+231bps

+1bps

5-year

CZ5YT=RR

1.4560

-0.0020

+211bps

-4bps

10-year

CZ10YT=RR

1.5530

-0.0110

+185bps

-4bps

Poland

2-year

PL2YT=RR

1.5760

-0.0120

+229bps

-4bps

5-year

PL5YT=RR

1.9670

-0.0180

+262bps

-5bps

10-year

PL10YT=RR

2.3770

0.0350

+267bps

+1bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

2.15

2.04

1.88

2.17

Hungary

HUFFRABUBOR=

0.29

0.40

0.50

0.00

Poland

PLNFRAWIBOR=

1.74

1.73

1.71

1.72

Note: FRA quotes

are for ask prices

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(Editing by Hugh Lawson)

((radu.marinas@thomsonreuters.com; +40 21 527 04 93; Reuters Messaging: radu.marinas.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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