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CEE MARKETS-Romanian leu steady ahead of no confidence vote, Polish rate meeting in focus

meeting in focus@

BUCHAREST, Feb 5 (Reuters) - The Romanian leu held steady against the euro on Wednesday ahead of a no-confidence vote in parliament which could see the Liberal minority government fall after just three months, while other central and eastern European currencies were firmer. The no-confidence vote was brought about by the former ruling Social Democrats who have criticized the cabinet of Liberal Prime Minister Ludovic Orban for trying to alter electoral laws without public debate. With a smaller center-left parliamentary grouping lending verbal support earlier on Wednesday, the vote could succeed in toppling the cabinet, ushering in weeks of political instability and stalled policymaking when widening budget and current account deficits are pressuring assets and rating outlooks. "Still, the success of the no-confidence motion could be the first step for early parliamentary elections," Raiffeisen Bank said in a research note. The Liberals have said in January they aimed to trigger a snap parliamentary election by mid-year, but analysts said a fragmented and polarized parliament could make the task unlikely. Romania has local and parliamentary elections scheduled for mid and late 2020. By 0930 GMT, the Romanian leu was flat against the euro at 4.7765 while Bucharest's bluechip index was also unchanged on the day, bucking a regional firming trend. Elsewhere in the region, Poland's central bank is expected to hold interest rates despite rising inflation. However, Commerzbank said in a note that policymakers may want to avoid sounding too dovish and invite comparison with neighboring Hungary, where the central bank has kept policy ultra loose. "Such pressure could spread to the zloty as well if the market concludes from MPC remarks that NBP will not adjust its monetary policy no matter what," Commerzbank said. "It will be interesting to see today if the MPC is interested to send out a different, more conditional message to the FX market or simply dismiss inflation data and repeat previous guidance." The Hungarian forint has become a financing currency in carry-trade deals, as the central bank has kept interest rates at the lowest level in Central Europe. This means investors have been buying higher-yielding assets with forints, and built up short positions expecting further forint weakness. On Wednesday, the Polish zloty traded 0.3% higher against the euro. The Hungarian forint and Czech crown were 0.1% higher each. Warsaw's led gains in the region's stocks, up 1.1% on the day. Hungary's was up 0.8% and Czech 0.5%. Analysts expect the Czech central bank to hold rates at its meeting on Thursday, even as policymakers have put a debate on rate increases back on the agenda. Romania's central bank is also seen on hold at its meeting on Friday.

CEE SNAPSHO ATMARKETS T 0947

CET CURRENC IES

Latest Previou Daily Change

s

bid close change in 2020Czech <EURCZK= 25.0800 25.1000 +0.08% +1.40%crown >Hungary <EURHUF= 335.880 336.110 +0.07% -1.41%forint > 0 0Polish <EURPLN= 4.2650 4.2755 +0.25% -0.20%zloty >Romanian <EURRON= 4.7755 4.7775 +0.04% +0.27%leu >Croatian <EURHRK= 7.4570 7.4515 -0.07% -0.16%kuna >Serbian <EURRSD= 117.550 117.620 +0.06% +0.02%dinar > 0 0Note: calculated from 1800daily CET

change

Latest Previou Daily Change

s

close change in 2020Prague 1096.13 1090.21 +0.54% -1.75%

00

Budapest 44126.3 43864.8 +0.60% -4.25%7 2Warsaw 2130.88 2106.63 +1.15% -0.89%Buchares 9978.70 9965.56 +0.13% +0.01%

t

Ljubljan <.SBITOP 968.18 965.65 +0.26% +4.57%a >Zagreb 2017.44 2021.60 -0.21% +0.00%Belgrade <.BELEX1 815.52 815.87 -0.04% +1.73%

5>

Sofia 573.55 575.15 -0.28% +0.95%Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.9540 0.1900 +260bp +18bpsR> s5-year <CZ5YT=R 1.6320 0.0060 +223bp -2bpsR> s<CZ10YT= 1.5400 -0.0020 +191bp -4bps10-year RR> s

Poland

2-year <PL2YT=R 1.5900 0.0080 +223bp +0bpsR> s5-year <PL5YT=R 1.8600 0.0160 +246bp -1bpsR> s<PL10YT= 2.2090 0.0210 +258bp -1bps10-year RR> s

FORWARD

3x6 6x9 9x12 3M

interba nk

Czech 2.19 2.19 2.20 2.16Rep <PRIBOR=>Hungary 0.43 0.42 0.50 0.29Poland 1.75 1.74 1.75 1.71Note: are for askFRA prices

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(Reporting by Luiza Ilie in Bucharest, Jason Hovet in Prague and Krisztina Than in Budapest; editing by Giles Elgood)