CEE MARKETS-Crown hits 4-month low as CNB sees no urgent need to hike rates

* Fed signal of Dec rate hike weighs on CEE fx via dollar buying

* Crown extends loss after cbank head suggests no rate hike in Dec

* Profit taking on OTP shares on earnings report drives .BUX lower

BUDAPEST, Nov 9 (Reuters) – The Czech crown touched a 4-month low against the euro on Friday after central bank (CNB) governor Jiri Rusnok said the bank had no urgency to keep increasing interest rates. Central European currencies and equities were under pressure anyway as buyers turned to the dollar after the Federal Reserve indicated on Thursday that another rate increase was likely in December. Earlier this week the dollar was sold, buoying the region’s currencies, as a strengthening of the opposition Democrats at Tuesday’s midterm elections in the United States caused expectations for less fiscal stimulus and rate hikes. The region’s most liquid unit, the zloty led the weakening on Friday, shedding 0.3 percent to trade at 4.2885 at 1025 GMT, retreating from a 6-week high. The crown was weaker by 0.2 percent at 25.927, off a 4-month low set at 25.97 after Rusnok’s comments. Rusnok said the CNB can easily wait until its first meeting next year before deciding on another rate hike. Right after the CNB delivered its fourth straight rate hike on Nov. 1 to fight inflation, Rusnok said the bank could increase rates again in December but only if global markets pushed the crown to weaker-than-expected levels. The minutes of the meeting published on Friday said rate setters had a consensus that real interest rates should not be negative and that the main uncertainty was the crown exchange rate. Statistics figures released on Friday showed that annual inflation unexpectedly slowed to 2.2 percent in October from 2.3 percent in September, but remained above the CNB’s 2 percent goal. “If koruna (the crown) starts appreciating again, we expect the CNB to deliver only one additional hike approx. in the middle of the next year, as the appreciating koruna should tighten monetary conditions sufficiently,” Erste analyst Jiri Polansky said in a note. “However, if koruna remains weak, the CNB will hike three times in 2019, in our view,” he added. The sour global mood equally weakened the crown and the forint, which retreated from a 3-month high reached on Thursday, even though the Hungarian central bank is seen retaining its loose policy stance despite a rise in inflation in October to near the top of its 2-4 percent target. A sell-off in global stock markets after the Fed’s comments and weak Chinese data also weighed on some regional equities. Budapest’s main stock index shed 0.7 percent, driven lender. Expectations for a rise in the bank’s third-quarter earnings boosted the stock to a 6-month high on Thursday, and investors took profit after the earnings report was published on Friday.

CEE SNAPSHOT AT MARKETS 1125 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.9270 25.8780 -0.19% -1.48% crown > Hungary <EURHUF= 321.4600 320.9000 -0.17% -3.28% forint > Polish <EURPLN= 4.2885 4.2770 -0.27% -2.62% zloty > Romanian <EURRON= 4.6575 4.6570 -0.01% +0.48% leu > Croatian <EURHRK= 7.4275 7.4303 +0.04% +0.04% kuna > Serbian <EURRSD= 118.3100 118.3600 +0.04% +0.16% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1087.74 1085.950 +0.16% +0.89%

0

Budapest 38427.45 38713.45 -0.74% -2.41% Warsaw 2242.34 2262.84 -0.91% -8.89% Bucharest 8612.39 8571.53 +0.48% +11.07% Ljubljana <.SBITOP 808.10 812.93 -0.59% +0.21% > Zagreb 1787.55 1785.70 +0.10% -3.00% Belgrade <.BELEX1 745.31 749.36 -0.54% -1.91%

5>

Sofia 594.77 595.00 -0.04% -12.20%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.6240 0.1270 +224bps +13bps

R>

5-year <CZ5YT=R 1.8360 0.0100 +200bps +3bps

R>

10-year <CZ10YT= 2.1110 0.0040 +168bps +3bps

RR> Poland

2-year <PL2YT=R 1.5870 0.0060 +221bps +1bps

R>

5-year <PL5YT=R 2.5030 0.0070 +267bps +3bps

R>

10-year <PL10YT= 3.2460 -0.0030 +282bps +2bps

RR>

FORWARD RATE AGREEMEN

T

3×6 6×9 9×12 3M

interban k

Czech Rep 2.05 2.20 2.35 1.98

<PRIBOR=

>

Hungary 0.33 0.61 0.97 0.16 Poland 1.78 1.84 1.92 1.72

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto; Editing by Angus MacSwan)

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