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CEE MARKETS-Crown rebounds after strong output data, Serbia seen holding rates

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* Czech Oct industrial output surges by mnore than 10 pct

* Crown is off 3-week low, timing and scope of rate hikes mulled

* Serbian central bank meets, key rate seen on hold at 3.5 pct

* Polish ruling party to meet, likely to replace PM Szydlo

BUDAPEST/PRAGUE, Dec 7 (Reuters) - The crown rebounded from 3-week lows on Thursday as October Czech industrial output and trade account figures underpinned healthy and balanced economic expansion. Czechs were a leader of Central Europe's robust growth in the third quarter, with 5 percent annual output rise. Thursday's data showed 10.5 percent annual surge in Czech industrial output, and the trade account remained in a surplus, even though smaller than expected. The crown, with 5.5 percent gain versus the euro so far this year, became the world's top-performing currency in 2017 after the central bank (CNB) removed a cap on it in April, boosted by the strong economy and two CNB rate hikes since August The currency reached a 3-week low of 25.696 on Wednesday amid doubts if the CNB continues to raise rates at its meeting next week, but firmed mildly to 25.617 by 1004 GMT on Thursday. Investments could rise further next year, said Viktor Zeisel, analyst at Komercni Banka. "We expect a (CNB) rate hike in each quarter of the next year," he added. The region's and the Czech Republic's worsening labour shortage forces firms to invest in efficiency and automation, Erste analyst Jiri Polansky said. The output data, though it heralds higher wage growth, will not increase pressure on the CNB to hike rates because a rise in productivity-enhancing investment moderates inflation, he added. A Reuters poll of analysts showed that the crown is seen leading the forint and the zloty higher next year. Elsewhere, the dinar eased 0.1 percent to 119.65 against the euro ahead of the Serbian central bank's meeting where it is expected to keep the region's highest benchmark rate on hold at 3.5 percent. It would not put further pressure on the dinar by cutting rates, on top of expectation that the Federal Reserve will hike rates next week, Raiffeisen analyst Stephan Imre said in a note. That is relevant due to a high share of dollar investors in Belgrade's bond market, he said. In Romania, an auction of 3-year papers is expected to draw healthy demand and see a cut-off yield near Wednesday's closing mid of 3.4 percent, ING analysts said in a note. The bond originally launched in August has reached a historic high, along with other Romanian yields boosted by concerns that inflation will surge in the economy which grew 8.8 percent in annual terms in the third quarter. The rise has revived interest among non-resident yield-hunters, Imre said. In Warsaw, the zloty firmed slightly. Top officials of the ruling party PiS, meeting after markets close, are expected to replace Prime Minister Beata Szydlo. The likely replacement is her deputy, Mateusz Morawiecki, who would be a market-friendly choice, analysts said.

CEE MARKETS SNAPSH AT 1104 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.617 25.619 +0.01 5.43% 0 5 % Hungary 314.60 314.46 -0.04% -1.84% forint 00 50 Polish zloty 4.2110 4.2140 +0.07 4.58%

%

Romanian leu 4.6325 4.6291 -0.07% -2.10% Croatian 7.5370 7.5472 +0.14 0.24% kuna % Serbian 119.65 119.49 -0.13% 3.09% 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 1056.0 1053.1 +0.28 +14.5 8 5 % 9% Budapest 37851. 37591. +0.69 +18.2 81 53 % 8% Warsaw 2406.4 2394.6 +0.49 +23.5 9 7 % 4% Bucharest 7672.3 7670.1 +0.03 +8.29 1 6 % % Ljubljana 779.15 773.03 +0.79 +8.58 % % Zagreb 1863.5 1853.2 +0.56 -6.58% 9 3 % Belgrade 743.97 743.97 +0.00 +3.71 % % Sofia 667.41 666.31 +0.17 +13.8 % 1%

BONDS

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

Republic

2-year 0.075 0.072 +082b +7bps

ps

5-year 0.801 0.015 +118b +2bps

ps

10-year 1.42 -0.001 +112b +0bps

ps Poland

2-year 1.656 0.006 +240b +0bps

ps

5-year 2.657 0.023 +304b +2bps

ps

10-year 3.258 0.004 +295b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.99 1.19 1.31 0

IBOR=>

Hungary <BU 0.085 0.135 0.17 0.03

BOR=>

Poland <WI 1.773 1.818 1.919 1.73

BOR=>

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