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CEE MARKETS 2-Hungary's forint sets new record low against euro

Marton Dunai

(Adds new EUR/HUF record, central bank comment) BUDAPEST, Aug 29 (Reuters) - Hungary's forint set an all-time low against the euro on Thursday due to fears of a global recession, a trade war and a no-deal Brexit, but its government bond yields were close to historic lows thanks to a solid economy at home. The forint reached 331.85 to the euro, underperforming regional peers and passing the previous record of 330.70, as fears of external challenges dented risk appetite and the central bank held to its loose monetary policy. The forint's weakening took fresh energy as U.S. markets opened and the dollar gained, which usually causing riskier assets to fall. That trend triggered some stop losses in uncharted territory, a dealer said in Budapest. "Despite a resolution for the Italian situation for now, the laundry list of worries remains long, with Brexit still looming and worsening with parliament potentially suspended, and a trade war still on the horizon, so we see more weakening," he said. "The forint is not as attractive to a large investor pool as it used to be, on account of the record low interest rate. But common sense does dictate that 1-2 units higher than this and some people will start buying." Market players stressed there was no panic selling. "The good news is that the forint weakening involves no panic, so a new low is unlikely to generate quick rises in selling pressure," Erste Bank said in a note to clients. The National Bank of Hungary remains unfazed as it sees inflation declining again from the top end of its 2-4% tolerance range. "The central bank has no exchange rate target," it said in an emailed reply to Reuters questions earlier on Thursday. "We do not comment on questions about the forint's exchange rate level or the exchange rate's development." It added: "The exchange rate influences the central bank's assessment of the situation indirectly, fundamentally via its effect on the inflation and economic outlook." While the forint is exposed to global trends and the effects of a loose domestic monetary policy, Hungary's strong economic performance and stringent fiscal policy keep government bonds attractive enough to keep yields near the all-time lows it set in the middle of August. "Globally, (bond) investors are on the prowl for anything that is remotely secure and offers a positive yield," a bond dealer said. "Plus the government offers new premium retail bonds, which have replaced a big chunk of the supply."

CEE SNAPSHOT ATMARKETS 1527 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech 25.8700 25.8760 +0.02% -0.63%

crown

Hungary 331.6700 330.1800 -0.45% -3.19%

forint

Polish 4.3898 4.3891 -0.02% -2.28%

zloty

Romanian 4.7293 4.7278 -0.03% -1.59%

leu

Croatian 7.4040 7.4000 -0.05% +0.08%

kuna

Serbian 117.7700 117.7500 -0.02% +0.45%

dinar

Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1028.46 1024.080 +0.43% +4.25%

0

Budapest 39284.11 38706.56 +1.49% +0.37%Warsaw 2067.53 2051.44 +0.78% -9.18%Bucharest 9232.89 9245.95 -0.14% +25.04%Ljubljana 852.20 852.01 +0.02% +5.96%Zagreb 1874.60 1863.58 +0.59% +7.19%Belgrade <.BELEX15 744.89 748.21 -0.44% -2.21%>Sofia 569.95 566.45 +0.62% -4.12%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=RR 1.1250 0.0490 +203bps +7bps>5-year <CZ5YT=RR 0.8560 0.0440 +179bps +6bps>10-year <CZ10YT=R 1.0580 0.0210 +177bps +2bps

R> Poland

2-year <PL2YT=RR 1.5480 0.0300 +246bps +5bps>5-year <PL5YT=RR 1.6530 0.0320 +259bps +5bps>10-year <PL10YT=R 1.8180 0.0590 +253bps +6bps

R>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.08 1.88 1.70 2.14

PRIBOR=>

Hungary < 0.31 0.36 0.34 0.26

BUBOR=>

Poland < 1.71 1.65 1.59 1.72

WIBOR=> Note: FRA are for ask prices quotes

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(Reporting by Reuters bureaux Editing by Mark Heinrich)