CEE MARKETS-Forint regains ground before rate meeting, leads FX higher

Reuters

PRAGUE, Nov 19 (Reuters) - Hungary's forint firmed 0.2% against the euro on Tuesday, ending a three-day slide and supported by expectations Europe's most dovish central bank will keep interest rates steady and by a Moody's forecast on economic growth. Other central European currencies were also firmer while stocks were mixed as Prague and Budapest rose by up to half a percent and Warsaw dropped. Given rising inflation, analysts see decreasing chances the Hungarian central bank will take any easing steps at its meeting on Tuesday. The bank itself has said any necessary adjustment would be implemented through changes in its overnight deposit rate, which is at -0.05%, or tools designed to adjust market liquidity. Its base rate is at 0.9%, the lowest in central Europe. With strong economies still adding to inflationary pressures, central banks in the region have not rushed into easing policy like major central banks from the European Central Bank to the U.S. Federal Reserve. In the Czech case, rate setters are still debating whether tighter policy is needed. Hungary's policy stance has weighed on the forint along with weak global sentiment as Britain's uncertain departure from the European Union and back-and-forth in the U.S.-China trade dispute rattle investors. The forint nudged up to 334.90 to the euro on Tuesday, snapping a three-day slide that had brought it to its weakest since the end of September, when it hit an all-time low of 336.28. "That (level) could serve as temporary respite," Erste Investments said in a trade note. The forint found some support from a Moody's ratings agency report saying Hungary's economic growth should remain robust in 2020 and 2021. Other currencies also firmed with hopes remaining the United States and China were moving closer to a trade deal. The Polish zloty and the Czech crown gained 0.1%. Commerzbank said it expected the forint to stay under pressure although at the moment investors were unwilling to test the central bank's statement it has no exchange rate target with global risk currently supportive. It said Hungary's low rate policy combined with its current rates of price growth ran the risk of a possible inflation overshoot, which could weigh on the forint going forward. CEE MARKETS SNAPSHOT AT 1121 CET CURRENCIES Latest Previous Daily Change bid close change in 2019 EURCZK= Czech crown 25.5550 25.5840 +0.11% +0.59% EURHUF= Hungary forint 334.9000 335.5350 +0.19% -4.13% EURPLN= Polish zloty 4.2914 4.2935 +0.05% -0.04% EURRON= Romanian leu 4.7750 4.7754 +0.01% -2.53% EURHRK= Croatian kuna 7.4400 7.4410 +0.01% -0.40% EURRSD= Serbian dinar 117.3700 117.4300 +0.05% +0.79% Note: daily change calculated from 1800 CET Latest Previous Daily Change close change in 2019 .PX Prague 1081.92 1078.1800 +0.35% +9.67% .BUX Budapest 43959.65 43867.73 +0.21% +12.32% .WIG20 Warsaw 2221.03 2229.92 -0.40% -2.44% .BETI Bucharest 9726.36 9724.93 +0.01% +31.73% .SBITOP Ljubljana 883.16 883.56 -0.05% +9.81% .CRBEX Zagreb 1990.40 1988.09 +0.12% +13.81% .BELEX15 Belgrade 766.69 766.47 +0.03% +0.66% .SOFIX Sofia 554.96 555.77 -0.15% -6.64% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread CZ2YT=RR 2-year 1.4020 0.0280 +203bps +2bps CZ5YT=RR 5-year 1.3000 0.0860 +189bps +8bps CZ10YT=RR 10-year 1.4880 -0.0130 +182bps -2bps Poland PL2YT=RR 2-year 1.4030 0.0020 +203bps -1bps PL5YT=RR 5-year 1.8560 0.0330 +244bps +3bps PL10YT=RR 10-year 2.1320 0.0400 +246bps +3bps FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M interbank Czech Rep 2.23 2.23 2.16 2.18 Hungary 0.25 0.30 0.34 0.19 Poland 1.73 1.72 1.68 1.71 Note: FRA quotes are for ask prices ************************************************************** (Reporting by Jason Hovet in Prague and Gergely Szakacs in Budapest; Editing by Susan Fenton)