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CEE MARKETS-Forint recoups losses on bets for central bank tightening

Sandor Peto

* Forint reverses fall as central bank to hold news conference

* NBH may increase o/n deposit rate, announce liquidity cut

* Hungarian bonds tread water after rally, eyes on NBH

BUDAPEST, March 26 (Reuters) - The forint regained early losses after the Hungarian central bank (NBH) said it would a hold a news conference following its meeting on Tuesday, boosting speculation it could start to increase interest rates from record lows. The NBH has been regarded as one of the most dovish central banks this decade, but started to gradually shift towards more hawkish rhetoric last year. Its interest rates are still at record lows and real interest rates in Hungarian markets are among the lowest in the world, pushed deep into negative by a rise in inflation. But the forint has become Central Europe's best performing currency this year. In the two months since the middle of January, it has surged almost 4 percent to 11-month highs at 312.65 versus the euro. It has been boosted by expectations a rise in the NBH's core inflation measures above 3 percent, the midpoint of its target range, would prompt monetary tightening at the bank's March meeting, where it will also discuss its quarterly inflation report. Those expectations were knocked back in the past week by global economic growth worries, expectations for a Federal Reserve rate cut and a delay in euro zone monetary tightening. On Tuesday, the forint eased towards Monday's one-month lows of 317.09, but recovered after the NBH said Governor Gyorgy Matolcsy and Deputy Governors Marton Nagy and Laszlo Windisch would hold a news conference at 1400 GMT. At 1035 GMT, the forint traded at 316 versus the euro, slightly firmer on the day. Hungarian government bonds were treading water after a 30 basis point drop in yields in the past weeks. ING analyst Peter Virovacz said he retained his forecast that the bank would keep its base rate on hold, announce a minor rise in its -0.15 percent overnight deposit rate at 1300 GMT and some tightening in liquidity in forint markets in its statement at 1400 GMT. "Such a strong show-up of top officials would not be justified if they just want to backtrack," he said. Virovacz said he expected a "dovish hike", with the bank explaining that risks abounded looking forward including domestic and euro zone economic developments. Dealers said the bank was skating on thin ice, and needed to defend the credibility of its inflation targeting policy. If it fails to convince investors, the forint could weaken further given the shift in Hungary's current account to a deficit from a surplus towards the end of last year. "If they do nothing ... the forint could head towards 320," one Budapest-based currency dealer said.



Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.7700 25.7510 -0.07% -0.24%crown >Hungary <EURHUF= 316.0000 316.1500 +0.05% +1.61%forint >Polish <EURPLN= 4.2950 4.2927 -0.05% -0.13%zloty >Romanian <EURRON= 4.7565 4.7556 -0.02% -2.15%leu >Croatian <EURHRK= 7.4150 7.4175 +0.03% -0.07%kuna >Serbian <EURRSD= 117.8800 117.9800 +0.08% +0.36%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1080.18 1076.330 +0.36% +9.49%


Budapest 42015.14 41605.17 +0.99% +7.35%Warsaw 2318.64 2312.79 +0.25% +1.85%Bucharest 7998.87 7954.29 +0.56% +8.33%Ljubljana <.SBITOP 877.38 871.83 +0.64% +9.09%>Zagreb 1795.99 1793.30 +0.15% +2.70%Belgrade <.BELEX1 731.04 730.16 +0.12% -4.02%


Sofia 581.04 582.80 -0.30% -2.26%


Yield Yield Spread Daily(bid) change vs Bund change


Czech spread


2-year <CZ2YT=R 1.8130 -0.1130 +237bps -12bps


5-year <CZ5YT=R 1.7780 -0.0060 +220bps -2bps


10-year <CZ10YT= 1.8620 0.0110 +188bps +1bps

RR> Poland

2-year <PL2YT=R 1.6920 -0.0650 +225bps -8bps


5-year <PL5YT=R 2.1990 -0.0020 +262bps -1bps


10-year <PL10YT= 2.8520 -0.0040 +287bps -1bps




3x6 6x9 9x12 3M

interban k

Czech Rep 2.12 2.15 2.14 2.02



Hungary 0.38 0.52 0.67 0.13Poland 1.74 1.74 1.74 1.72

Note: FRA are for ask prices quotes



(Reporting by Sandor Peto; Editing by Mark Potter)