CEE MARKETS-Dinar leads fall on CPI decline, central bank selling

* Serbian CPI falls, triggers central bank rate cut talk

* Zloty retreats though central bank sees it strengthening

(Recasts with Serbian inflation fall, comments) BUDAPEST/Belgrade, March 12 (Reuters) - The dinar led an easing of Central European currencies on Monday as a fall in Serbia's inflation triggered expectations for an interest rate cut by the central bank. The bank also continued to sell the currency in the market, which bucked the weakening trend of other units in the region last month, setting 3-and-1/2-month highs. Other currencies eased last month amid concern that global inflation and interest rates would rise, while the dinar was buoyed partly by demand at Serbian government bond auctions. Serbian data released on Monday showed a fall in annual inflation to 1.5 percent in February from January's 1.9 percent.

The dinar traded at 118 against the euro at 1335 GMT, weaker by 0.2 percent from Friday. "Such a strong dinar and low inflation are sure indicators of a rate cut," one Belgrade-based dealer said. Even before the figures, analysts predicted that a fall in inflation would fuel demand at an auction of 5-year government bonds on Tuesday. The data repeated a similar, though smaller, fall in Czech and Hungarian inflation. Poland's central bank (NBP) cut its own inflation forecasts last week. The zloty set its weakest levels since the middle of December last week, after NBP Governor Adam Glapinski said he saw no reason to start to lift record-low interest rates until the end of 2020. The currency firmed slightly early on Monday, but retreated behind the 4.2 line against the euro later, to trade at 4.2018, down 0.2 percent. Polish forward rate agreements have priced in an interest rate hike of about 18 basis point in the next 12 months, less than the NBP's standard 25 basis points. Analysts said Glapinski's forecast of no rise for years was not set in stone and could change if inflation started to rise. The NBP also said in its inflation report that the zloty could strengthen. A stronger zloty makes imports cheaper, and Poland reported a 0.5 billion euro trade deficit for January on Monday. But the trade gap is much less of a worry in Poland than in Romania where it has been boosted by surging wages. The deficit in Romania, a much smaller economy than Poland, widened by roughly a third on the year in January to 775 million euros. A likely rise in inflation would probably lead to further central bank rate hikes, analysts said. Romanian stocks led a rise in the region, driven by a 4 percent jump in the shares of lender BRD Groupe Societe Generale, after it proposed a dividend payment.



Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.4480 25.4700 +0.09% +0.37% crown > Hungary <EURHUF= 311.9500 311.5800 -0.12% -0.33% forint > Polish <EURPLN= 4.2018 4.1937 -0.19% -0.61% zloty > Romanian <EURRON= 4.6622 4.6570 -0.11% +0.38% leu > Croatian <EURHRK= 7.4460 7.4375 -0.11% -0.21% kuna > Serbian <EURRSD= 118.0000 117.7900 -0.18% +0.42% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1129.50 1123.600 +0.53% +4.76%


Budapest 38801.84 38411.50 +1.02% -1.46% Warsaw 2367.03 2354.54 +0.53% -3.83% Bucharest 8575.79 8477.18 +1.16% +10.60% Ljubljana <.SBITOP 817.83 818.45 -0.08% +1.42% > Zagreb 1846.46 1857.70 -0.61% +0.19% Belgrade <.BELEX1 739.38 741.06 -0.23% -2.69%


Sofia 681.30 685.86 -0.66% +0.57%


Yield Yield Spread Daily (bid) change vs Bund change


Czech spread


2-year <CZ2YT=R 0.8170 -0.0150 +138bps +0bps


5-year <CZ5YT=R 1.2860 -0.0010 +128bps +3bps


10-year <CZ10YT= 1.9390 -0.0120 +131bps +1bps

RR> Poland

2-year <PL2YT=R 1.5810 -0.0080 +214bps +1bps


5-year <PL5YT=R 2.4920 -0.0230 +249bps +1bps


10-year <PL10YT 3.2880 -0.0060 +266bps +2bps




3x6 6x9 9x12 3M

interban k

Czech Rep 0.95 1.06 1.22 0.90



Hungary 0.07 0.10 0.18 0.03 Poland 1.74 1.76 1.80 1.71

Note: FRA are for ask prices quotes



(Additional reporting by Luiza Ilie in Bucharest and Marcin Goettig in Warsaw Editing by Robin Pomeroy)