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CEE MARKETS-Leu hovers near 4-1/2-year lows as PM faces no-confidence vote

BUDAPEST, June 21 (Reuters) - The Romanian leu hovered near 4-1/2-year lows as Prime Minister Sorin Grindeanu faced a no-confidence vote in parliament on Wednesday. His Social Democrat Party (PSD) and a coalition partner withdrew support for Grindeanu a week ago saying he had failed to roll out their governing programme, leaving his fate in the balance. At 0749 GMT, the leu was 0.1 percent stronger on the day, broadly in line with gains among other currencies in the region. However, the unit has been the worst performer in central Europe, down 1.2 percent since the start of the year. "This political turmoil coincides with economic upheaval. While, at the start of the year, the country reported the highest growth rates among Eastern European countries amid very low inflation rates, this momentum is essentially based on thrifty fiscal policy," analysts at Commerzbank said in a note. "The elevated political uncertainty is weighing on the RON. The managed currency recently traded at just under 4.60 EUR-RON and has thus not been so weak since 2012. The political situation should keep the RON under pressure initially." The forint was a touch stronger in early trade, pulling back from a one-month-low caused by Tuesday's decision by the National Bank of Hungary (NBH) to push more funds than expected from its three-month deposits into the economy to help cut borrowing costs. The NBH, seen as the most dovish central bank in central Europe, also lowered its inflation forecasts for the next two years and affirmed its readiness to ease monetary conditions further if below-target inflation persists. "This supports our call of limited HUF appreciation potential going forward as the (NBH) will remain reluctant to end its expansionary monetary policy," analysts at Raiffeisen Bank said in a note. "We would expect to see HUF underperforming its peers PLN (Polish zloty) and CZK (Czech crown) over the coming months as their central banks are expected to tighten monetary policy earlier." Before Tuesday's policy meeting, analysts polled by Reuters had forecast the Hungarian base rate staying unchanged at least until the second quarter of 2019. Czech central bank Governor Jiri Rusnok was quoted as saying on Wednesday that the strength of the crown, trading on the strong side of its former cap on its value at 27 to the euro, could be a reason for a slower rise in interest rates.

A currency dealer said the crown was likely to stay in a range between 26.150-26.450 in the coming days.

CEE MARKETS SNAPSH AT 0949 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.325 26.339 +0.05 2.59% 0 0 % Hungary 308.87 309.16 +0.10 -0.02% forint 00 50 % Polish zloty 4.2365 4.2445 +0.19 3.95%

%

Romanian leu 4.5925 4.5975 +0.11 -1.25%

%

Croatian 7.4140 7.4195 +0.07 1.90% kuna % Serbian 121.56 121.79 +0.19 1.47% dinar 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 994.40 998.21 -0.38% +7.90

%

Budapest 35762. 35989. -0.63% +11.7 50 69 5% Warsaw 2284.3 2302.8 -0.80% +17.2 1 3 7% Bucharest 8353.7 8376.5 -0.27% +17.9 0 0 1% Ljubljana 785.63 790.35 -0.60% +9.48

%

Zagreb 1856.8 1856.0 +0.05 -6.92% 7 3 % Belgrade 706.16 703.95 +0.31 -1.56%

%

Sofia 686.32 687.32 -0.15% +17.0

3% BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year 0.005 -0.044 +065b -3bps

ps

5-year -0.001 0.041 +041b +5bps

ps

10-year 0.952 0.057 +070b +7bps

ps Poland

2-year 1.931 -0.084 +258b -7bps

ps

5-year 2.591 -0.011 +300b +0bps

ps

10-year 3.155 -0.013 +291b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.34 0.42 0.5 0

IBOR=>

Hungary <BU 0.19 0.22 0.26 0.15

BOR=>

Poland <WI 1.77 1.765 1.81 1.73

BOR=>

Note: FRA are for ask quotes prices ******************************************************** *****

(Reporting by Luiza Ilie and Gergely Szakacs; Editing by Andrew Heavens)