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CEE MARKETS-Forint eases ahead of cbank swap tender; zloty hit by reform fears

fears@ BUDAPEST, Sept 25 (Reuters) - The forint and zloty eased slightly on Monday ahead of a central bank (NBH) liquidity tender in Budapest and on worries over Poland's judicial reforms, which have been criticised by European Union partners. Polish President Andrzej Duda is set to unveil his own proposals on Monday, which may be different from previously announced government plans, and a meeting of EU ministers in Brussels could add to pressure over measures that critics say will damage the rule of law in Poland. While equities mostly eased in Central Europe, traders did not see any significant impact from elections in Germany, the region's biggest export market and a key power in the EU. German Chancellor Angela Merkel won a fourth term in Sunday's vote but will face tough coalition talks and harsh opposition criticism after support for the far-right surged. "That is not a reason for happiness, but overall there was no huge surprise and the euro/dollar cross has not changed much either," one fixed-income trader said in Budapest. "As long as there is no huge trouble about the coalition talks, any big impact is unlikely." The Hungarian forint tested four-month lows against the euro and was trading at 310.40 by 0838 GMT. In the short-term it could fall as low as 312, down from last-month's 28-month highs beyond 302, another dealer said. The key factor is the monetary easing measures announced by the NBH last week, when it also cut its inflation forecasts, the dealer said. The measures, including a cut in the central bank's overnight deposit rate, have pushed Hungarian debt yields to record lows, and short-term market interest rates to negative territory. The bank could pump further forint liquidity into domestic markets through its foreign exchange swap tenders on Monday. "The key thing is the one-year swaps amount ... If it is high, the yield on three-year bonds may fall to 0.35 percent from 0.4 in the secondary market now," the fixed-income trader said. The zloty eased by 0.1 percent to 4.2724 versus the euro. "Given the uncertain political situation in the country and in Germany, in the short term there is a risk of a slight increase in the EURPLN (zloty weakening)," ING analysts said in a note, adding that the currency could firm in the longer term. The Czech crown was steady at 26.036 against the euro ahead of the Czech central bank's meeting on Wednesday. "The bank will wait on a further interest rate rise until November forecasts," CSOB analysts said in a note. "However, nobody will be left in doubt that further rate increases are really around the corner in light of fast economic and wage growth."

CEE MARKETS SNAPSH AT 1038 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.036 26.039 +0.01 3.73% 0 0 % Hungary 310.40 309.88 -0.17% -0.51% forint 00 00 Polish zloty 4.2724 4.2673 -0.12% 3.08% Romanian leu 4.5955 4.5983 +0.06 -1.32%

%

Croatian 7.4850 7.4845 -0.01% 0.94%

kuna

Serbian 119.55 119.40 -0.13% 3.18% 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 1044.2 1046.5 -0.22% +13.3 4 1 1% Budapest 38118. 38178. -0.16% +19.1 49 63 1% Warsaw 2474.3 2480.7 -0.26% +27.0 8 3 3% Bucharest 7852.3 7848.1 +0.05 +10.8 8 0 % 3% Ljubljana 796.41 799.42 -0.38% +10.9

8%

Zagreb 1823.1 1829.4 -0.34% -8.61% 5 2 Belgrade 725.66 725.19 +0.06 +1.16 % % Sofia 676.90 678.65 -0.26% +15.4

3% BONDS

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

Republic

2-year 0.056 0.282 +074b +28bp ps s 5-year 0.227 0 +050b +1bps

ps

10-year 1.126 0 +069b +2bps

ps Poland

2-year 1.754 -0.038 +244b -4bps

ps

5-year 2.647 -0.016 +292b +0bps

ps

10-year 3.319 -0.023 +288b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.69 0.85 0.94 0

IBOR=>

Hungary <BU 0.02 0.09 0.12 0.05

BOR=>

Poland <WI 1.77 1.79 1.87 1.73

BOR=>

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

(Additional reporting by Jason Hovet in Prague; Editing by David Goodman)