CEE MARKETS-Hungary's forint lags as central bank seen staying dovish

Credit: REUTERS/Laszlo Balogh

The forint slightly lagged other central European currencies on Thursday on expectations that the Hungarian central bank will next week put off policy tightening after the European Central Bank flagged further stimulus.

By Krisztina Than

BUDAPEST, June 20 (Reuters) - The forint slightly lagged other central European currencies on Thursday on expectations that the Hungarian central bank will next week put off policy tightening after the European Central Bank flagged further stimulus.

Mario Draghi, the head of the ECB, said on Tuesday it was prepared to cut interest rates or resume bond purchases if the inflation outlook did not improve.

The Federal Reserve on Wednesday signalled possible rate cuts of as much as half a percentage point in 2019, which helped emerging market currencies globally.

The forint EURHUF= , however, failed to benefit. At 0901 GMT, it was down 0.05% at 324.30 to the euro. The Polish zloty EURPLN= was trading 0.16% higher in offshore deals, and the Czech crown was up 0.11%. The Polish and Romanian markets are closed for a holiday.

"We expect the forint to ease further and, as the ECB flagged fresh monetary loosening, the National Bank of Hungary will likely maintain its rather dovish monetary communication at its next meeting on Tuesday," brokerage Equilor said in a note.

Erste bank analysts agreed. "The June rate-setting meeting ...would not bring any step pointing to normalization," they said.

According to a Reuters poll published on Thursday, all 15 analysts forecast Hungary's base rate HUINT=ECI will remain at 0.9% on June 25, when the NBH will also provide key forecasts from its quarterly inflation report.

Economists in the June survey were divided over the prospect of an increase in Hungary's -0.05% deposit rate, with nine of 14 analysts saying the rate would stay flat.

Hungarian interbank rates were little changed according to a fixing BUBOR, despite an extraordinary injection by the central bank on Wednesday to ease a liquidity squeeze partly caused by big value-added tax payments by companies.

"The liquidity shortage prevails. Somehow this money was not enough," a fixed income trader said in Budapest. But he said a large amount of a government bond will mature early next week which should boost liquidity again.

Hungary sold more bonds than planned at an auction on Thursday, with yields falling across the board.

CEE MARKETS

SNAPSHOT

AT 1101 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2019

EURCZK=

Czech crown

EURCZK=

25.6200

25.6490

+0.11%

+0.34%

EURHUF=

Hungary forint

EURHUF=

324.3000

324.1500

-0.05%

-0.99%

EURPLN=

Polish zloty

EURPLN=

4.2608

4.2676

+0.16%

+0.68%

EURRON=

Romanian leu

EURRON=

4.7301

4.7291

-0.02%

-1.61%

EURHRK=

Croatian kuna

EURHRK=

7.4010

7.4025

+0.02%

+0.12%

EURRSD=

Serbian dinar

EURRSD=

117.7400

117.8800

+0.12%

+0.48%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2019

.PX

Prague

.PX

1056.07

1057.5600

-0.14%

+7.05%

.BUX

Budapest

.BUX

40747.35

40980.24

-0.57%

+4.11%

.WIG20

Warsaw

.WIG20

2319.71

2319.71

+0.00%

+1.89%

.BETI

Bucharest

.BETI

8607.28

8582.84

+0.28%

+16.57%

.SBITOP

Ljubljana

.SBITOP

885.52

883.36

+0.24%

+10.10%

.CRBEX

Zagreb

.CRBEX

1901.57

1901.57

+0.00%

+8.74%

.BELEX15

Belgrade

.BELEX15

714.83

720.02

-0.72%

-6.15%

.SOFIX

Sofia

.SOFIX

579.68

579.98

-0.05%

-2.49%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

CZ2YT=RR

2-year

CZ2YT=RR

1.6030

0.0710

+234bps

+9bps

CZ5YT=RR

5-year

CZ5YT=RR

1.4270

-0.0250

+208bps

-1bps

CZ10YT=RR

10-year

CZ10YT=RR

1.5370

-0.0360

+184bps

-2bps

Poland

PL2YT=RR

2-year

PL2YT=RR

1.5700

-0.0180

+230bps

+0bps

PL5YT=RR

5-year

PL5YT=RR

1.9820

0.0170

+263bps

+3bps

PL10YT=RR

10-year

PL10YT=RR

2.3870

0.0190

+269bps

+4bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

2.16

2.05

1.92

2.17

Hungary

HUFFRABUBOR=

0.29

0.40

0.50

0.25

Poland

PLNFRAWIBOR=

1.74

1.73

1.71

1.72

Note: FRA quotes

are for ask prices

(Reporting by Krisztina Than; editing by John Stonestreet)

((krisztina.than@thomsonreuters.com; +36 1 327 4745; Reuters Messaging: krisztina.than.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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