CEE MARKETS-Crown hits five-year high on rate hike talk, dollar pushes back zloty

By Kitco News / January 26, 2018 / www.kitco.com / Article Link

* Zloty and forint ease as Trump talks up dollar

* Hungary yield curve steepens, central bank seen countering that

* Czechs start presidential election, markets ignore it

* Czech crown hits 5-year high, rate hike is expected


(Adds crown surge to new five-year high)

By Sandor Peto

BUDAPEST, Jan 26 (Reuters) - The Czech crown hit a five-year high against the euro on Friday, bolstered by expectations of a central bank (CNB) rate hike next week.

At the same time, buying of the dollar, which U.S. President Donald Trump has talked up, weakened the zloty and the forint.

The CNB is widely expected to raise its main repo rate by 25 basis points to 0.75 percent on Feb. 1 to fight inflation as the Czech economy grows rapidly in what would be its third hike since August.

The crown hit a 5-year high at 25.284 against the euro, to trade at 25.315 at 1416 GMT, up 0.2 percent.

"February's rate hike is consistent with our forecast of the Czech koruna (crown) for which we predict EUR/CZK 25.20 at the end of March," Raiffeisen analyst Milan Frydrych said in a note.

Markets shrugged off the Czech run-off presidential election, which started on Friday. Pro-EU academic Jiri Drahos is contesting the vote against incumbent Milos Zeman. While sound economic fundamentals in most of Central Europe buoy local markets, international markets fuel jitters, market participants said.

But the latest comments from U.S officials on the dollar and guidance from the European Central Bank keep investors uncertain and bets divided over trends in the major currency crosses and in government bond markets, traders said.

The forint eased 0.1 percent against the dollar. The zloty shed 0.2 percent to trade at 4.144, off a 2-and-1/2-high set on Thursday at 4.1361.

The dollar may be overbought and if investors continue to buy it the forint, which has traded around 309 against the euro this year, may underperform regional peers and ease through the 310 psychological level, dealers said.

Hungary's central bank (NBH), regarded as one of the most dovish monetary authorities in the world, is expected to reaffirm its loose policy at its meeting next week. It may even make further dovish hints, analysts have said. It is also expected to confirm that it wants to flatten the yield curve, using its new interest rate swap facility.

Hungary's three-year bond yield dropped 2 basis points from Thursday's fixing to 0.53 percent, while the 10-year yield rose 2 basis points to 2.16 percent.

CEE SNAPSHOT AT

MARKETS 1516 CET

CURRENCI

ES

LatestPreviousDaily Change

bid close changein 2018Czech<EURCZK= 25.3150 25.3600+0.18%+0.90%crown> Hungary<EURHUF=309.5200309.2400-0.09%+0.45%forint > Polish <EURPLN=4.14404.1370-0.17%+0.78%zloty> Romanian <EURRON=4.66604.6730+0.15%+0.29%leu> Croatian <EURHRK=7.41807.4245+0.09%+0.17%kuna > Serbian<EURRSD=118.5300118.7600+0.19%-0.03%dinar> Note:calculated from 1800 CETdailychange

LatestPreviousDaily Change

close changein 2018Prague 1132.231133.760-0.13%+5.02%

0Budapest 40729.2840431.65+0.74%+3.43%Warsaw 2596.21 2589.30+0.27%+5.49%Bucharest 8426.80 8413.46+0.16%+8.68%Ljubljana<.SBITOP837.16834.84+0.28%+3.82%

> Zagreb 1864.89 1867.09-0.12%+1.19%Belgrade <.BELEX1778.36774.81+0.46%+2.44%

5>Sofia 710.20708.17+0.29%+4.83%

BONDS

Yield Yield SpreadDaily

(bid) changevs Bund change

inCzechspreadRepublic 2-year <CZ2YT=R0.46300.0490 +101bps +3bps

R>5-year <CZ5YT=R1.07800.0470 +112bps +2bps

R>10-year<CZ10YT=1.83300.0350 +121bps +3bps

RR> Poland 2-year <PL2YT=R1.55500.0120 +211bps -1bps

R>5-year <PL5YT=R2.71800.0180 +276bps -1bps

R>10-year<PL10YT=3.41800.0430 +280bps +3bps

RR>

FORWARD RATEAGREEMEN

T

3x6 6x9 9x123M

interban

kCzech Rep 1.021.181.340.78

<PRIBOR=

> Hungary 0.090.130.210.02 Poland 1.771.801.891.72 Note: FRAare for ask pricesquotes **************************************************************(Additional reporting by Radu Marinas in Bucharest/Bartosz Chmielewski in Warsaw; Editing by Matthew Mpoke Bigg)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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