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CEE MARKETS-Forint erases 2017 gains as new round of easing looms

BUDAPEST, Sept 15 (Reuters) - The Hungarian forint eased further on Friday, erasing all of its gains made in 2017, as investors positioned for a new round of monetary easing by the National Bank of Hungary next week. At 0806 GMT, the forint traded at 308.97 versus the euro, marginally weaker on the day and turning into the red for the year, underperforming most other central European peers but for the Romanian leu, the region's laggard. The forint has lost 2 percent of its value since late August after the National Bank of Hungary, the most dovish central bank in the region, raised the prospect of another round of easing to combat what it sees as a benign underlying inflation picture. In a Sept. 11-13 Reuters survey, all of the 17 analysts who gave a projection for next Tuesday's meeting said the bank would keep its base rate unchanged at a record-low 0.9 percent. But several analysts said it could ease policy further by boosting market liquidity or by cutting its overnight deposit rate further into negative territory from the current -0.05 percent. "With the promise of new unconventional monetary easing, MNB has injected an 'unknown' into the equation, which stopped long HUF positions in their tracks," analysts at Commerzbank said in a note. "In our view, the forint is unlikely to recover immediately, at least not until visibility on monetary policy has been restored." Economists at Erste Bank said crossing the 200-day moving average opened the door to further losses in the forint towards the 310 mark in the short term. "The expected easing of monetary conditions in Hungary next Tuesday could unlock the remaining value in Hungarian government bonds," said analyst Stephan Imre at RBI. "In the week-to-date, Hungarian government bonds fell across the curve with the front-end and the belly of the curve slipping to all-time lows." The Polish zloty lost 0.16 percent in early trade, pressured by rising risks on the Korean Peninsula. "The risk related to situation in North Korea weighs on the market at the beginning of the day, which could weigh on Polish assets," economists at BZ WBK said in a note. "In the afternoon, we will learn U.S. data that could boost Polish bonds if they surprise to the downside. In the first part of the next week, domestic labour market and industrial output data will be released which, in our view, could put an upside pressure on Polish yields."

CEE SNAPSHOT AT 1006 CET

MARKETS CURRENCIES

Latest Previous Daily Change bid close change in 2017 Czech crown 26.0770 26.0690 -0.03% 3.57% Hungary forint 308.9700 308.8300 -0.05% -0.05% Polish zloty 4.2830 4.2760 -0.16% 2.82% Romanian leu 4.5985 4.6018 +0.07% -1.38% Croatian kuna 7.4850 7.4834 -0.02% 0.94% Serbian dinar 119.0300 119.0200 -0.01% 3.63% Note: daily change calculated previous close at 1800 from CET

STOCKS

Latest Previous Daily Change close change in 2017 Prague 1045.56 1043.34 +0.21% +13.45% Budapest 38284.72 38243.20 +0.11% +19.63% Warsaw 2512.34 2507.43 +0.20% +28.98% Bucharest 8089.12 8024.04 +0.81% +14.17% Ljubljana 799.66 799.20 +0.06% +11.44% Zagreb 1831.08 1833.82 -0.15% -8.21% Belgrade 725.05 726.70 -0.23% +1.07% Sofia 684.43 683.53 +0.13% +16.71%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread 2-year 0.038 -0.016 +075bp -1bps

s

5-year -0.009 0 +031bp +1bps

s

10-year <CZ10YT=RR 1.001 0.006 +060bp +1bps > s

Poland

2-year 1.725 -0.012 +244bp +0bps

s

5-year 2.556 -0.003 +287bp +1bps

s

10-year <PL10YT=RR 3.206 -0.019 +280bp -1bps > s FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interbank

Czech Rep <P 0.73 0.88 0.98 0

RIBOR=>

Hungary <B 0.09 0.11 0.13 0.12

UBOR=>

Poland <W 1.755 1.779 1.808 1.73

IBOR=>

Note: FRA quotes are for

ask prices

(Reporting by Reuters bureaux; Writing by Gergely Szakacs; Editing by Keith Weir)