CEE MARKETS-Forint slides as Hungarian govt threatens to veto EU budget

Anita Komuves

By Anita Komuves BUDAPEST, Nov 16 (Reuters) - The forint weakened on Monday as the Hungarian government said it was ready to veto the European Union's budget and COVID-recovery fund, while other Central European currencies were stable and regional stock markets firmed. Government spokesman Zoltan Kovacs told Reuters that Hungary will veto the EU's 2021-2027 budget and post-COVID recovery fund unless its fellow member states revise a clause to tie disbursement of EU funds to rule of law conditions. Polish Prime Minister Mateusz Morawiecki sent a letter to EU institutions last week containing a similar threat. "The upcoming vote on the EU budget is causing tension in the market. The threat of the Hungarian veto plays a role in the weakening of the forint," a Budapest-based FX-trader said. "It is going to affect the zloty as well, but Hungary is smaller and thus more vulnerable to these pieces of news." The forint was 0.54% weaker by 1027 GMT, trading at 358.55 per euro and underperforming its peers. The Polish zloty was up 0.23% and trading at 4.4810 versus the common currency. The Czech crown edged up 0.02% to 26.4300 per euro. "Regional currencies appreciated strongly in the previous two weeks, so further appreciation, amid the ongoing COVID-19 pandemic, would be difficult to achieve," Erste Bank wrote. Markets are also eyeing the National Bank of Hungary's rate-setting meeting on Tuesday. Accoring to a Reuters poll of analysts the bank is expected to leave its base rate at 0.6% as a retreat in inflation and gains in the forint ease pressure on the bank. Most stock markets in the region firmed against a global risk-on backdrop, with Warsaw up 1.68%, and Budapest and Bucharest both edging up 0.05%. Prague's blue chip index rose 1.2%, with telecoms group O2 adding 3% after the regulator announced late on Friday that it and two other incumbent mobile operators had won frequencies in an auction connected to future next-generation 5G networks. CEE SNAPSHO AT MARKETS T 1127 CET CURRENC IES Latest Previous Daily Change bid close change in 2020 EURCZK= Czech <EURCZK= 26.4300 26.4350 +0.02% -3.78% crown > EURHUF= Hungary <EURHUF= 358.550 356.6300 -0.54% -7.64% forint > 0 EURPLN= Polish <EURPLN= 4.4810 4.4915 +0.23% -5.01% zloty > EURRON= Romanian <EURRON= 4.8715 4.8699 -0.03% -1.71% leu > EURHRK= Croatian <EURHRK= 7.5650 7.5735 +0.11% -1.58% kuna > EURRSD= Serbian <EURRSD= 117.450 117.5500 +0.09% +0.10 dinar > 0 % Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2020 .PX Prague 922.46 911.5400 +1.20% -17.31 % .BUX Budapest 37353.9 37335.10 +0.05% -18.94 3 % .WIG20 Warsaw 1778.77 1749.41 +1.68% -17.27 % .BETI Buchares 8914.17 8910.13 +0.05% -10.66 t % .SBITOP Ljubljan <.SBITOP 833.61 834.46 -0.10% -9.96% a > .CRBEX Zagreb 1655.25 1641.37 +0.85% -17.95 % .BELEX1 Belgrade <.BELEX1 707.32 710.15 -0.40% -11.77 5 5> % .SOFIX Sofia 426.00 425.62 +0.09% -25.02 % Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT=R 2-year <CZ2YT=R 0.0340 -0.0170 +077bp -1bps R R> s CZ5YT=R 5-year <CZ5YT=R 0.6720 -0.0250 +141bp -2bps R R> s CZ10YT= <CZ10YT= 1.1420 -0.0210 +170bp -1bps RR 10-year RR> s Poland PL2YT=R 2-year <PL2YT=R 0.0230 -0.0030 +076bp +0bps R R> s PL5YT=R 5-year <PL5YT=R 0.4060 -0.0130 +115bp -1bps R R> s PL10YT= <PL10YT= 1.1930 -0.0120 +175bp +0bps RR 10-year RR> s FORWARD 3x6 6x9 9x12 3M interb ank Czech 0.35 0.37 0.42 0.35 Rep <PRIBOR= > Hungary 0.74 0.74 0.73 0.77 Poland 0.21 0.21 0.22 0.22 Note: are for ask FRA prices quotes ********************************************** **************** (Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan)