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CEE MARKETS-Forint pulls back from record low as FX market steadies before Fed

Fed@

PRAGUE, Sept 18 (Reuters) - Hungary's forint on Wednesday pulled back from a record low hit in the previous session with central European currencies steadying, as markets waited on the outcome of U.S. Federal Reserve meeting which is expected to bring another rate cut. Analysts have seen easier policies from the Fed and, more importantly, the European central bank as being supportive for currencies in the region, where central banks remain neutral on interest rates and are noncommittal on cuts. Prague dealers said much of the expected Fed cut has been priced in already, so there would be little impact from the U.S. decision. However, there remains room for disappointment, especially among bonds, Polish bank PKO BP said. "The Fed's comments (on Wednesday) may disappoint investors and further profit-taking might occur combined with an increase in government bond yields. This will indirectly weaken the Polish market," PKO said, adding 10-year yields could head above 2.20% after dipping below 2% earlier this month. Poland's 10-year paper was bid with a yield of 2.09% on Wednesday, down 5 basis points. The Polish zloty dipped 0.1% to 4.341 to the euro, while the Czech crown and the Romanian leu were steady at 25.895 and 4.735, respectively. The forint rose 0.2% to 333.01 to the euro, off an all-time low of 334.35 hit on Tuesday. Central Europe's economies remain on solid ground even amid a euro zone slowdown, growing worry that Britain could crash out of the European Union without a deal with Brussels, and jitters over U.S-China trade tensions. But the region's currencies have been under pressure because of those outside risks, especially any disorderly Brexit that would choke up European trade. Commerzbank said the forint has also underperformed peers, most recently due to the start of the central bank's corporate bond buying scheme on Monday, aimed at creating a liquid market for company debt. "Since this purchase is part of the QE program, it amounts to monetary easing at a time when inflation is well above target this puts pressure on the forint," Commerzbank said. On Tuesday, currencies and stocks were shaken by geopolitical concerns following attacks on Saudi oil facilities over the weekend, before finding some relief toward the end of the session after Saudi Arabia's energy minister said the country has managed to restore oil supplies. Stock markets in central Europe climbed 0.3%-0.4% on Wednesday, mostly recouping Tuesday's losses.

CEE MARKETS SNAPSHOT AT

1050 CET CURRENCIES

Latest Previous Daily Changebid close change in 2019EURCZK= Czech crown 25.8950 25.8935-0.01% -0.73%EURHUF= Hungary forint 333.0100 333.5350+0.16% -3.58%EURPLN= Polish zloty 4.3409 4.3378-0.07% -1.18%EURRON= Romanian leu 4.7350 4.7356+0.01% -1.71%EURHRK= Croatian kuna 7.3990 7.3965-0.03% +0.15%EURRSD= Serbian dinar 117.4200 117.5600+0.12% +0.75%Note: daily change calculated from 1800 CETLatest Previous Daily Changeclose change in 2019.PX Prague 1050.54 1047.5100+0.29% +6.49%.BUX Budapest 40704.75 40596.71+0.27% +4.00%.WIG20 Warsaw 2201.39 2192.71+0.40% -3.30%.BETI Bucharest 9300.93 9265.94+0.38% +25.97%.SBITOP Ljubljana 860.46 859.13+0.15% +6.99%.CRBEX Zagreb 1893.51 1885.80+0.41% +8.27%.BELEX15 Belgrade 759.21 759.87-0.09% -0.33%.SOFIX Sofia 577.96 578.97-0.17% -2.78%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change in

Czech Republic spread

CZ2YT=RR 2-year 1.3510 0.0210+206bps +3bpsCZ5YT=RR 5-year 1.1990 0.0890+194bps +10bpsCZ10YT=RR 10-year 1.3880 -0.0150+189bps +1bps

Poland

PL2YT=RR 2-year 1.4830 -0.0180+219bps -1bpsPL5YT=RR 5-year 1.8290 -0.0380+257bps -2bpsPL10YT=RR 10-year 2.0940 -0.0460+259bps -2bpsFORWARD RATE AGREEMENT3x6 6x9 9x12 3M interbankCzech Rep 2.16 2.09 1.98

2.14

Hungary 0.26 0.29 0.33

0.21

Poland 1.74 1.71 1.70

1.72

Note: FRA quotes are for ask prices*************************************************************

(Reporting by Jason Hovet in Prague, Krisztina Than and Gergely Szakacs in Budapest and Anna Koper in Warsaw; Editing by Subhranshu Sahu)