×

CEE MARKETS-Dinar retreats as Serbian central bank surprises with rate cut

* CEE banks not worried by inflation apart from Czechs

* ECB CPI forecast cut would help CEE currencies - trader

(Recasts with Serbian interest rate cut) BUDAPEST, Sept 7 (Reuters) - The dinar eased on Thursday after Serbia's central bank (CBS) surprised by cutting its main interest rate to help economic growth. It reduced Central Europe's highest main interest rate to 3.75 percent, after keeping it steady at 4 percent for more than a year. All 10 analysts and traders polled by Reuters had expected an unchanged rate, and the bank had repeatedly said that uncertainties in global markets justified caution in policies.

But on Thursday it said it wanted to give "additional support to lending activity and economic growth". Earlier this week, Prime Minister Ana Brnabic and the International Monetary Fund said Serbia's growth could fall behind earlier forecasts. The dinar eased 0.1 percent against the euro to 119.6 by 1146 GMT, drifting away from four-year highs set late last month at 118.78. It was helped in recent months by seasonal foreign currency inflows, including financing for infrastructure projects. But analysts in a Reuters poll this week projected a 3 percent weakening for the next 12 months, while other regional currencies in the region are seen firming. "Strong RSD (dinar) has combined with low oil prices in providing a small, if surprise, opportunity for the CBS to cut rates," said Peter Attard Montalto, an analyst at Nomura. "The economy has relatively tight fiscal policy this year whilst it does not have the (European Union) structural fund boon its neighbors do, and so there is some scope for a small amount of easing," he added. The cut swings the balance towards central bank doves in the region. The Czech central bank became the first in the region and the European Union last month to raise interest rates in more than five years, but its 2 percent inflation target is the lowest in Central Europe. Hungary's central bank has flagged further monetary easing, and two of its economists said on Thursday that annual inflation could retreat late this year after a rise in August and September. Comments from Poland's central bank after its meeting on Wednesday did not signal short-term worries over inflation either. Regional currencies were directionless, although the forint recouped some of its recent losses, firming 0.3 percent against the euro. If the European Central Bank cuts inflation forecasts, that could lend some support to Central European currencies, which mostly have higher yields than euro zone countries, one Budapest-based fixed-income trader said. "In that case, it will be a bit more difficult for the (Hungarian) central bank to weaken the forint," the trader said.

CEE MARKETS SNAPSH AT 1346 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.105 26.108 +0.01 3.46% 0 0 % Hungary 305.40 306.48 +0.36 1.12% forint 00 50 % Polish zloty 4.2490 4.2455 -0.08% 3.65% Romanian leu 4.5985 4.5970 -0.03% -1.38% Croatian 7.4325 7.4307 -0.02% 1.65%

kuna

Serbian 119.60 119.45 -0.13% 3.14% 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 1023.3 1024.9 -0.16% +11.0 5 5 4% Budapest 37896. 37878. +0.05 +18.4 63 86 % 2% Warsaw 2499.0 2512.4 -0.53% +28.3 9 0 0% Bucharest 7992.6 8015.7 -0.29% +12.8 5 3 1% Ljubljana 812.49 812.44 +0.01 +13.2 % 2% Zagreb 1884.3 1888.9 -0.24% -5.54% 6 0 Belgrade 729.20 727.70 +0.21 +1.65 % % Sofia 706.24 705.93 +0.04 +20.4 % 3%

BONDS

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

Republic

2-year -0.022 0.005 +070b -2bps

ps

5-year 0.068 0.09 +041b +8bps

ps

10-year 0.956 0.064 +060b +5bps

ps Poland

2-year 1.67 0.022 +239b +0bps

ps

5-year 2.535 0.009 +288b +0bps

ps

10-year 3.196 0.004 +284b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.7 0.81 0.9 0

IBOR=>

Hungary <BU 0.15 0.2 0.24 0.15

BOR=>

Poland <WI 1.76 1.78 1.81 1.73

BOR=>

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

(Reporting by Sandor Peto; Editing by Dale Hudson)