CEE MARKETS-Leu eases though CPI remains high; dollar rebound hits forint

Credit: REUTERS/David W Cerny

Central European currencies and stocks mostly fell as risk aversion increased amid the threat of the U.S.-China trade war and the dollar regained some ground after U.S. inflation data.

By Sandor Peto

BUDAPEST, June 12 (Reuters) - Central European currencies and stocks mostly fell as risk aversion increased amid the threat of the U.S.-China trade war and the dollarregained some ground after U.S. inflation data.

The leu did not benefit from higher-than-expected May inflation. The crown EURCZK= also weakened after Tuesday's Czech inflation data showed a pick-up, even though it regained some ground on Wednesday.

The region's main currencies have risen to multi-week or multi-month highs against the euro in recent weeks as expectations for Federal Reserve interest rate cuts led to a selling of the dollar .DXY.

The dollar's cautious rebound on Wednesday mainly affected the forint, which is unlikely to receive support from a meeting of the National Bank of Hungary on June 25, dealers said.

The forint EURHUF= fell 0.3% against the euro to 321.9 by 1423 GMT.

The zloty EURPLN=firmed slightly versus the euro, and continued to rebound against the Hungarian unit PLNHUF=R, firming through 75.5.

Romania's leu EURRON= shed 0.1% against the euro. Remaining near five-month highs, it traded at 4.724.

"This easing is not big, and following the past weeks' surge, it is normal," one Budapest-based dealer said.

Romania's annual inflation was steady at 4.1% percent in May, above the central bank's 1.5% to 3.5% target range and forecasts.

Inflation could retreat slightly by the year-end. But the central bank will need to fight high core inflation, using its variable rate tenders to stem a likely rise in liquidity in leu markets in the coming months, ING Bank said in a note.

"Given the global context, the probability for rate hikes ... is very low," the note said.

Romanian bonds were mixed, with the yield on two-year debt bid lower by 5 basis points at 3.46% and the 10-year yield rising 9 basis points to 4.75%, while Poland's 10-year yield dropped 4 basis points to 2.485%.

Expected continuing loose monetary policy in the euro zone also fuels uncertainty over Czech interest rates.

Czech forward rate agreements price in rate cuts, but some analysts believe the Czech central bank's next move will be its ninth rate increase since 2017, in a bid to fight inflation.

Czech government bonds drew solid demand at an auction. Supply can dry up in the summer, Komercni Banka traders said in a note ahead of the sale.

A drop in primary supply is also a risk in Hungary, which sold 529 billion forints ($1.87 billion) worth of a new high-yield retail savings bond in a week, the biggest weekly outflow ever recorded.

"The debt agency AKK will want to see how it goes in the next weeks, and if they change financing policy, more FX bond repurchases is one of the options," one Budapest-based bond trader said.

A 10-year euro-denominated bond launched by Croatia was robustly oversubscribed on Wednesday.

CEE MARKETS

SNAPSHOT

AT 1623 CET

CURRENCIES

Latest

Previous

Daily

Change

bid

close

change

in 2019

Czech crown

EURCZK=

25.6080

25.6240

+0.06%

+0.39%

Hungary forint

EURHUF=

321.9000

321.0500

-0.26%

-0.25%

Polish zloty

EURPLN=

4.2580

4.2628

+0.11%

+0.74%

Romanian leu

EURRON=

4.7245

4.7201

-0.09%

-1.49%

Croatian kuna

EURHRK=

7.4125

7.4135

+0.01%

-0.03%

Serbian dinar

EURRSD=

117.8800

118.0100

+0.11%

+0.36%

Note: daily change

calculated from

1800 CET

Latest

Previous

Daily

Change

close

change

in 2019

Prague

.PX

1050.14

1061.8900

-1.11%

+6.44%

Budapest

.BUX

40582.11

41234.66

-1.58%

+3.69%

Warsaw

.WIG20

2274.22

2295.60

-0.93%

-0.11%

Bucharest

.BETI

8608.22

8633.12

-0.29%

+16.58%

Ljubljana

.SBITOP

870.54

871.97

-0.16%

+8.24%

Zagreb

.CRBEX

1912.85

1910.46

+0.13%

+9.38%

Belgrade

.BELEX15

731.10

731.70

-0.08%

-4.02%

Sofia

.SOFIX

578.63

580.34

-0.29%

-2.66%

BONDS

Yield

Yield

Spread

Daily

(bid)

change

vs Bund

change in

Czech Republic

spread

2-year

CZ2YT=RR

1.5900

0.0150

+225bps

+2bps

5-year

CZ5YT=RR

1.5040

-0.0260

+210bps

-2bps

10-year

CZ10YT=RR

1.6520

0.0060

+189bps

+1bps

Poland

2-year

PL2YT=RR

1.6640

0.0100

+233bps

+1bps

5-year

PL5YT=RR

2.0280

-0.0090

+262bps

+0bps

10-year

PL10YT=RR

2.5070

-0.0420

+274bps

-4bps

FORWARD

RATE

AGREEMENT

3x6

6x9

9x12

3M interbank

Czech Rep

CZKFRAPRIBOR=

2.16

2.06

1.97

2.17

Hungary

HUFFRABUBOR=

0.29

0.40

0.53

0.18

Poland

PLNFRAWIBOR=

1.73

1.72

1.71

1.72

Note: FRA quotes

are for ask prices

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

(Additional reporting by Radu Marinas in Bucharest, Jason Hovet in Prague and Alicja Ptak in Warsaw; editing by Larry King and Gabrielle Tétrault-Farber)

((sandor.peto@thomsonreuters.com)(+36 1 327 4744)(Reuters Messaging: sandor.peto.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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