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CEE MARKETS-Forint leads currency easing on overheating worry

Sandor Peto

* Toughness from China helps weaken currencies, stocks

* Romania raises inflation forecasts, CPI picked up in region

* Hungarian seen not reacting, forint sets 9-mth low

(Recasts with forint underperformance) BUDAPEST, May 17 (Reuters) - The Hungarian forint hit a 9-month-low against the euro on Friday due to concerns of a potential further rise in inflation if the central bank maintains its record-low base rate. The forint led other Central European currencies lower as tough comments from China in its trade war with the United States fueled risk aversion in global markets. Budapest and Warsaw topped losses in regional stock indexes, shedding 0.8%. There were also fears that the region's economies could become overheated. The main economies released robust first-quarter economic growth figures this week, led by a 5.3% annual rise in Hungary, while inflation has been rising across the region this year, fueled by surging wages and an increase in crude prices. Hungary's central bank is due to meet on May 28 but it is not expected to tighten policy, and may keep rates on hold later as it expects inflation to retreat late this year, market participants said. "This (expectation) causes the forint fall," said Peter Virovacz, analyst at ING in Budapest. "You can see that it is forint-specific as the crown and the zloty have weakened much less." The forint shed as much as 0.7%, trading at 326.38 against the euro, after touching a 9-month low at 326.47. Bid at 75.8487, the forint set a 7-1/2-month low against the zloty. The leu, the zloty and the Czech crown eased 0.1% against the euro by 1222 GMT. Romania's central bank sharply increased its inflation forecasts and its Governor Mugur Isarescu said there was no guarantee that raising the benchmark rate would curb price pressures. The Czech central bank hiked interest rates early this month to fight inflation, but is not expected to tighten them further this year. The Polish and Romanian banks kept rates on hold on Wednesday. Polish data released on Thursday showed a jump in annual net inflation to 1.7%, its highest level since late 2012. But the central bank is not worried, as based on its comments after its meeting on Wednesday, core inflation is only returning to normal levels, Raiffeisen analyst Dorotha Strauch said. "Thus it seems the indicator would have to continue to rise significantly to trigger a rate hike," she said in a note. The region's central banks expect sluggish euro zone economic growth to help keep a lid on inflation through low import prices. The forint' s fall accelerated on Friday after euro zone figures showed a tad higher annual inflation than expected. "Those figures, however, do not change the picture significantly... the forint had its own causes to fall," Virovacz said.



Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.7420 25.7260 -0.06% -0.14%crown >Hungary <EURHUF= 326.3800 324.1900 -0.67% -1.62%forint >Polish <EURPLN= 4.3015 4.2988 -0.06% -0.28%zloty >Romanian <EURRON= 4.7625 4.7600 -0.05% -2.28%leu >Croatian <EURHRK= 7.4305 7.4245 -0.08% -0.28%kuna >Serbian <EURRSD= 117.9900 117.9300 -0.05% +0.26%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1048.65 1051.570 -0.28% +6.29%


Budapest 39960.13 40288.28 -0.81% +2.10%Warsaw 2171.68 2188.43 -0.77% -4.61%Bucharest 8249.14 8212.27 +0.45% +11.72%Ljubljana <.SBITOP 868.60 864.65 +0.46% +8.00%>Zagreb 1859.59 1850.45 +0.49% +6.33%Belgrade <.BELEX1 732.14 732.00 +0.02% -3.88%


Sofia 565.48 569.12 -0.64% -4.88%


Yield Yield Spread Daily(bid) change vs Bund change


Czech spread


2-year <CZ2YT=R 1.5890 -0.1860 +224bps -18bps


5-year <CZ5YT=R 1.6780 0.0130 +220bps +3bps


10-year <CZ10YT= 1.8120 -0.0070 +193bps +2bps

RR> Poland

2-year <PL2YT=R 1.6750 -0.0090 +233bps +0bps


5-year <PL5YT=R 2.2360 -0.0080 +276bps +1bps


10-year <PL10YT= 2.8750 -0.0070 +299bps +2bps




3x6 6x9 9x12 3M

interban k

Czech Rep 2.22 2.22 2.18 2.20



Hungary 0.35 0.52 0.70 0.16Poland 1.75 1.75 1.76 1.72

Note: FRA are for ask prices quotes



(Additional reporting by Alan Charlish in Warsaw; Editing by Andrew Cawthorne)