Wires

CEE MARKETS-Crown surges to over 7-year high on surprise Czech rate hike

Anita Komuves

(Updates with unexpected Czech interest rate increase) BUDAPEST, Feb 6 (Reuters) - The Czech crown rose more than 0.8% on Thursday to scale its highest level since October 2012, after the Czech central bank unexpectedly raised interest rates by 25 basis points. At 1327 GMT, the crown was 0.7% stronger at 24.91 versus the euro, outperforming its central European peers which were little changed and extending its gains for the year to more than 2%. The central bank raised rates for the first time since May and set the main repo rate at 2.25%, defying expectations it would keep monetary policy settings unchanged as uncertainty about developments abroad and a firming crown balanced domestic inflationary pressures. All 13 analysts in a Reuters poll had expected the central bank to take no action. "The surprise decision by the Czech National Bank (CNB) to hike its two-week repo rate by 25 bps (to 2.25%) today will almost certainly be a one-off," Liam Peach, an analyst at Capital Economics said in a note. "Indeed, with inflation likely to ease and growth to slow, we think the policy rate will be lowered by next year," he said. The leu was stable and Romanian stocks rose after the liberal minority government fell in a no-confidence vote, which markets took as the first step towards snap elections that could restore stability after years of political turmoil. "The initial reaction in the leu to the vote of no confidence was positive," said Commerzbank analyst Alexandra Bechtel in a note. "Clearly for the FX market a bit of a bumpy end is preferable to the continued uncertainty of a political vacuum." Ousting the cabinet will likely usher in weeks of political wrangling and stalled policymaking in Romania at a time when widening budget and current account deficits are pressuring assets and rating outlooks. The vote, however, could open the way for an early election. "The sooner the country has a new government, the better it will be for the economy, especially when considering the serious fiscal adjustments needed this year," ING said in a note. Bucharest's bluechip index was up 0.9% on the day, at a near two-week high.

CEE SNAPSHO ATMARKETS T 1427

CET CURRENC IES

Latest Previou Daily Change

s

bid close change in 2020EURCZK Czech <EURCZK 24.9100 25.0880 +0.71% +2.10%= crown =>EURHUF Hungary <EURHUF 336.750 337.090 +0.10% -1.66%= forint => 0 0EURPLN Polish <EURPLN 4.2430 4.2474 +0.10% +0.32%= zloty =>EURRON Romanian <EURRON 4.7650 4.7665 +0.03% +0.49%= leu =>EURHRK Croatian <EURHRK 7.4555 7.4560 +0.01% -0.14%= kuna =>EURRSD Serbian <EURRSD 117.590 117.610 +0.02% -0.02%= dinar => 0 0Note: calculated from 1800daily CET

change

Latest Previou Daily Change

s

close change in 2020.PX Prague 1110.60 1103.37 +0.66% -0.45%

00

.BUX Budapest 44465.3 44020.0 +1.01% -3.51%6 3.WIG20 Warsaw <.WIG20 2114.13 2122.91 -0.41% -1.67%>.BETI Buchares 10124.2 10035.7 +0.88% +1.47%t 2 3.SBITO Ljubljan <.SBITO 973.75 970.87 +0.30% +5.17%P a P>.CRBEX Zagreb <.CRBEX 2023.55 2017.11 +0.32% +0.30%>.BELEX Belgrade <.BELEX 796.89 816.09 -2.35% -0.60%15 15>.SOFIX Sofia <.SOFIX 572.28 570.36 +0.34% +0.73%>Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year <CZ2YT= 1.9630 0.1850 +260bp +18bpsRR RR> sCZ5YT= 5-year <CZ5YT= 1.7470 0.1060 +233bp +10bpsRR RR> sCZ10YT <CZ10YT 1.5480 0.0290 +191bp +2bps=RR 10-year =RR> s

Poland

PL2YT= 2-year <PL2YT= 1.5600 -0.0120 +219bp -2bpsRR RR> sPL5YT= 5-year <PL5YT= 1.8210 -0.0190 +241bp -3bpsRR RR> sPL10YT <PL10YT 2.1460 -0.0580 +251bp -7bps=RR 10-year =RR> s

FORWARD

3x6 6x9 9x12 3M

interba nk

Czech <CZKFRA 2.20 2.19 2.13 2.16Rep ><PRIBO

R=>

Hungary <HUFFRA 0.34 0.51 0.60 0.30><BUBOR

=>

Poland <PLNFRA 1.74 1.71 1.70 1.71><WIBOR

=>

Note: are for askFRA prices

quotes

(Additional reporting by Luiza Ilie in Bucharest, Robert Muller in Prague; Editing by Amy Caren Daniel)