CEE MARKETS-Forint, crown on weaker footing over dovish central banks

Credit: REUTERS/Bernadett Szabo

The forint underperformed its Central European peers on Friday ahead of next week's Hungarian central bank meeting where the bank is seen sticking to its loose stance, and the Czech crown also eased despite positive sentiment on stock markets.

By Krisztina Than and Jason Hovet

BUDAPEST/PRAGUE, Nov 15 (Reuters) - The forint underperformed its Central European peers on Friday ahead of next week's Hungarian central bank meeting where the bank is seen sticking to its loose stance, and the Czech crown also eased despite positive sentiment on stock markets.

The crown EURCZK= weakened to a three-week low on Friday after minutes from the central bank's Nov. 7 policy meeting sounded less hawkish than many investors expected, a Prague dealer said.

The bank had voted 5-2 to leave rates on hold, with the minutes showing board members Tomas Holub and Vojtech Benda backing a 25 basis point increase to the main rate, which now sits at 2.0%.

The Czech central bank is still debating tightening policy even as most of the rest of Europe maintains loose monetary stances, with the region's robustly growing economies seen slowing as the impact of a slowdown in the euro zone makes itself felt.

Domestic demand in Central Europe remains very strong due to massive wage hikes, which could to some extent offset the impact if exports suffer.

GDP data on Thursday from most countries in the region showed that signs of a slowdown were already visible in the third quarter of 2018. Hungary stood out as economic growth accelerated more than expected, rising to an annual 5.0% in the third quarter.

* For an interactive version: https://tmsnrt.rs/2KgEAwH

While the vote at the Czech rate meeting last week was the same as at a previous meeting, Holub this time joined Benda in backing a hike, meaning three central bankers have supported higher rates at the last two sittings.

"A hawkish sign was Holub was voting for a hike. (But) the minutes seem dovish in some way," ING economist Jakub Seidler said.

The minutes showed board members saw signs of deterioration in the domestic economy since the last meeting and that most would tolerate a "short-term" breaching of the bank's 3% upper limit on inflation.

The forint EURHUF= fell 0.2% against the euro to 334.75 by 0935 GMT, edging towards a record low of 336.28 hit in September.

Analysts at brokerage Equilor said the forint could soon test this level based on the technical picture, after the level of 333 stopped and reversed the currency's earlier gains.

The National Bank of Hungary (NBH) is expected to keep interest rates unchanged at its policy meeting on Tuesday based on the unanimous forecast of 16 economists in a Reuters poll, which projects no change in official rates before 2021. The NBH has maintained its accommodative stance, warning of downside price risks due to weakening European activity.

Stock markets across the region firmed on Friday, as international sentiment improved on hopes that the United States and China were close to signing a long-awaited trade deal that could end the trade war that has rattled investors' nerves this year.

CEE MARKETS

SNAPSHOT

AT 1035 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2019

EURCZK=

Czech crown

EURCZK=

25.5850

25.5930

+0.03%

+0.48%

EURHUF=

Hungary forint

EURHUF=

334.7500

334.1350

-0.18%

-4.08%

EURPLN=

Polish zloty

EURPLN=

4.2788

4.2859

+0.17%

+0.25%

EURRON=

Romanian leu

EURRON=

4.7675

4.7673

-0.01%

-2.38%

EURHRK=

Croatian kuna

EURHRK=

7.4400

7.4385

-0.02%

-0.40%

EURRSD=

Serbian dinar

EURRSD=

117.2700

117.4750

+0.17%

+0.88%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2019

.PX

Prague

.PX

1085.84

1079.3900

+0.60%

+10.06%

.BUX

Budapest

.BUX

43330.21

43218.28

+0.26%

+10.71%

.WIG20

Warsaw

.WIG20

2234.79

2226.15

+0.39%

-1.84%

.BETI

Bucharest

.BETI

9698.70

9692.17

+0.07%

+31.35%

.SBITOP

Ljubljana

.SBITOP

875.60

877.08

-0.17%

+8.87%

.CRBEX

Zagreb

.CRBEX

1974.23

1974.34

-0.01%

+12.89%

.BELEX15

Belgrade

.BELEX15

769.64

769.15

+0.06%

+1.04%

.SOFIX

Sofia

.SOFIX

557.17

558.80

-0.29%

-6.27%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

CZ2YT=RR

2-year

CZ2YT=RR

1.4410

0.0810

+208bps

+8bps

CZ5YT=RR

5-year

CZ5YT=RR

1.1740

-0.0430

+178bps

-5bps

CZ10YT=RR

10-year

CZ10YT=RR

1.4680

0.0140

+181bps

+1bps

Poland

PL2YT=RR

2-year

PL2YT=RR

1.3850

-0.0140

+202bps

-2bps

PL5YT=RR

5-year

PL5YT=RR

1.8000

0.0060

+241bps

+0bps

PL10YT=RR

10-year

PL10YT=RR

2.0790

-0.0030

+242bps

-1bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

2.23

2.21

2.12

2.18

Hungary

HUFFRABUBOR=

0.27

0.33

0.35

0.19

Poland

PLNFRAWIBOR=

1.73

1.70

1.67

1.71

Note: FRA quotes

are for ask prices

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

Central Europe growth slowing pnghttps://tmsnrt.rs/2rIf0u9

Central Europe growth slowing interactivehttps://tmsnrt.rs/2KgEAwH

Czech rate expectationshttps://tmsnrt.rs/3776y7Q

(Reporting by Krisztina Than in Budapest and Jason Hovet in Prague; Editing by Hugh Lawson)

((krisztina.than@thomsonreuters.com))

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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