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CEE MARKETS-Forint retains easing bias as markets eye monetary easing next week

week@ BUDAPEST, Sept 14 (Reuters) - The forint retained its weakening bias on Thursday, on growing market expectations that the Hungarian central bank could loosen monetary conditions further at its meeting next week in the absence of significant inflationary pressures. Central Europe's most dovish central bank (NBH), which has kept its easing bias even as the Czech central bank starts hiking interest rates, has said it is ready to loosen policy with unconventional tools. The forint, which has been easing all this week, was trading at 308.40 to the euro at 0839 GMT, down 0.1 percent. Other currencies in the region were flat. "The forint is slowly drifting to the direction which the central bank probably wants to see," one Budapest-based dealer said. "The central bank is very relaxed concerning inflation." He added that markets were widely expecting the bank to announce further steps to ease monetary conditions on Sept. 19. Some analysts said the bank could even surprise markets with a more significant easing than anticipated. While the central bank has said it would keep its main base rate unchanged at a record-low 0.9 percent, some investors expect a cut in its overnight deposit rate further into negative territory from -0.05 percent. "Next week's central bank meeting could bring a surprise, and we could see stronger than expected monetary easing," Monika Kiss, analyst at brokerage Equilor, said in a note. Negative yields at two consecutive three-month treasury bill auctions in the past 10 days also signalled that investors were betting on a further easing measure. In the Czech Republic, central bank board member Vojtech Benda added to the voices signalling another interest rate hike is coming this year, telling Reuters on Wednesday he could imagine voting for a rate hike in September or November.

"(He is) making up a set of three firm hawks in the voting board, plus the governor who seems to be inclined for November," Komercni Banka trader Dalimil Vyskovsky said. The Czechs stepped ahead of others in the European Union by delivering a rate hike in August, its first in almost a decade. The crown showed little reaction, having lost momentum to push firmer beyond the 26 to the euro level, largely due to an overhang of crown positions in the market that had been built up before the central bank abandoned a currency cap in April. Czech bond yields were bid a touch higher.

CEE MARKETS SNAPSH AT 1040 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in 2017 Czech crown 26.100 26.103 +0.01 3.48% 0 5 % Hungary 308.40 308.17 -0.07% 0.14% forint 00 50 Polish zloty 4.2834 4.2835 +0.00 2.81%

%

Romanian leu 4.6012 4.6000 -0.03% -1.44% Croatian 7.4795 7.4695 -0.13% 1.01%

kuna

Serbian 118.84 119.01 +0.14 3.80% 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 1047.8 1044.3 +0.33 +13.69 2 3 % % Budapest 38261. 38119. +0.37 +19.56 62 09 % % Warsaw 2504.8 2500.1 +0.19 +28.59 3 6 % % Bucharest 8061.3 8040.0 +0.26 +13.78 4 6 % % Ljubljana 802.02 795.69 +0.80 +11.77 % % Zagreb 1838.0 1842.8 -0.26% -7.86% 6 0 Belgrade 727.49 728.96 -0.20% +1.41% Sofia 689.95 689.74 +0.03 +17.65 % %

BONDS

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

Republic

2-year -0.038 -0.038 +068b -3bps

ps

5-year 0.043 -0.022 +037b -2bps

ps

10-year 0.964 -0.021 +056b -2bps

ps Poland

2-year 1.697 -0.011 +241b -1bps

ps

5-year 2.564 -0.019 +289b -1bps

ps

10-year 3.217 -0.004 +282b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interba nk

Czech Rep <PR 0.72 0.85 0.96 0

IBOR=>

Hungary <BU 0.11 0.12 0.145 0.13

BOR=>

Poland <WI 1.755 1.779 1.808 1.73

BOR=>

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

(Reporting by Reuters bureaux; Writing by Krisztina Than; Editing by Catherine Evans)