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CEE MARKETS-Forint weakens, but CPI rise unlikely to cause rates to go

Sandor Peto

* Hungary's CPI rise to seven-year high causes no surprise

* Forint weakens, but stops short of five-month lows

* Hungarian central bank says tax-adjusted core CPI even drops

* Bids return for Hungarian bonds ahead of auction -trader

BUDAPEST, May 9 (Reuters) - The forint led declines by Central European currencies on Thursday after Hungary reported April's inflation rate reached a seven-year-high of 3.9 percent. Accelerating inflation can help currencies by raising expectations that interest rates will go up, but the National Bank of Hungary is unlikely to react to the April figures, analysts and dealers said. The increase was below expectations, although still near the central bank's 2 to 4 percent target range. The bank said its main inflation gauge, core inflation adjusted for the effects of tax changes, dropped to 3.4 percent from 3.5 percent in March.

It also said earlier that it would decide on policy changes when it discusses its quarterly inflation reports. The next report is due in June. The forint slipped 0.2 percent against the euro by 0813 GMT. The Czech crown, the zloty and the leu all shed 0.1 percent. The yield in five-year forint interest rate swaps dropped to 1.62 percent from 1.68 percent after the figures, a further indications that rate increases are unlikely for now. Hungary's 10-year bonds traded at a yield of 3.33 percent early in the session. Poland's corresponding yield was steady at 2.9315 percent. "Bids have returned ... In the past two or three days we did not see buyers, but now we can expect a normal or strong (bi-weekly Hungarian government bond) auction (later on Thursday)," the trader said. Emerging market currencies and global stock markets were also weighed down by worries that trade talks won't keep the United States from raising tariffs on Chinese goods, intensifying a trade war between the two countries. Warsaw's blue-chip equities index fell 0.7 percent to its lowest since November. In Central Europe's currency markets, only the Serbian dinar resisted the pressure, bid at 117.9, near the high end of its 90-day moving average at 118. The Serbian central bank is expected to leave its benchmark rate at 3 percent when it meets on Thursday. It has been buying dinars in the market this year to keep it from strengthening.

CEE SNAPSHOT ATMARKETS 1013 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.7350 25.7180 -0.07% -0.11%crown >Hungary <EURHUF= 324.7000 324.0500 -0.20% -1.11%forint >Polish <EURPLN= 4.2982 4.2925 -0.13% -0.20%zloty >Romanian <EURRON= 4.7600 4.7565 -0.07% -2.23%leu >Croatian <EURHRK= 7.4100 7.4090 -0.01% +0.00%kuna >Serbian <EURRSD= 117.9000 118.0200 +0.10% +0.34%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1063.01 1063.500 -0.05% +7.75%

0

Budapest 41132.94 41350.33 -0.53% +5.09%Warsaw 2206.11 2221.82 -0.71% -3.10%Bucharest 8301.38 8370.72 -0.83% +12.43%Ljubljana <.SBITOP 867.86 875.28 -0.85% +7.91%>Zagreb 1840.58 1839.23 +0.07% +5.25%Belgrade <.BELEX1 733.48 735.03 -0.21% -3.70%

5>

Sofia 567.30 566.97 +0.06% -4.57%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.6240 -0.1540 +225bps -15bps

R>

5-year <CZ5YT=R 1.7490 0.0070 +223bps +2bps

R>

10-year <CZ10YT= 1.8730 0.0060 +194bps +3bps

RR> Poland

2-year <PL2YT=R 1.6700 -0.0080 +230bps +0bps

R>

5-year <PL5YT=R 2.3010 -0.0110 +278bps +0bps

R>

10-year <PL10YT= 2.9510 -0.0020 +301bps +2bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.25 2.25 2.26 2.21

<PRIBOR=

>

Hungary 0.37 0.53 0.71 0.16Poland 1.74 1.75 1.79 1.72

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto, editing by Larry King)