CEE MARKETS-Forint, crown outperform with rate hike hopes in focus

·3 min read

PRAGUE, Sept 21 (Reuters) - The forint and Czech crown rebounded on Tuesday, with markets tuned to Hungary's central bank meeting where the pace of rate hikes may ease and Czech markets betting on a steeper rise in borrowing costs. Central European markets were knocked back on Monday by global investor jitters although they stabilised on Tuesday amid more confidence that contagion from the distress of debt-saddled Chinese developer Evergrande would be limited. Stock markets in Budapest and Warsaw rose around 1% and Prague gained 0.6% percent after Monday's sharp losses. Most central European currencies drifted on Tuesday, with the exception of Hungary's forint the Czech crown which firmed as investors count on higher interest rates. Czech central banker Tomas Holub told Reuters in an interview published on Tuesday that he would likely support a 50 basis point rate increase at the next policy meeting on Sept. 30, adding to signals that the central bank could deliver its biggest hike since 1997 next week. Hungary's central bank is expected to raise its base rate by 25 basis points to 1.75% on Tuesday, slowing the pace of tightening after three successive 30 basis-point increases since June. Erste Group Bank analysts said any move between 15-30 basis points was possible. "New inflation and growth forecasts may offer further insight into the monetary policy outlook," it said. The forint was up 0.4% at 352.99 to the euro at 0849 GMT. The crown gained 0.2% to 25.415 per euro. Both currencies have posted gains so far in 2021 with their respective central banks the first in the European Union to start raising interest rates to fight inflationary pressures coming from recovery from the coronavirus pandemic and amid global supply snags raising costs for producers. The Czech central bank has delivered two 25 basis point increases since June and markets are expecting the bank will opt for a stronger 50 basis point rise at its September meeting. Expectations were fortified on Tuesday after Holub's comments, which followed a similar tone from other central bank board members in the past week, indicating that a majority on the board is forming. Market interest rates ticked up in early trade. In Poland, the zloty eased 0.1% on the day, to 4.615 to the euro. The Polish central bank, unlike Hungarian or Czech peers, has been cautious in starting rate hikes despite a surge in inflation as it looks to avoid hurting a recovery. CEE SNAPSHO AT 1049 CET MARKETS T CURRENCIES Latest Previou Daily Change s bid close change in 2021 EURCZK Czech EURHUF Hungary 0 0 EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian 0 0 Note: calculated from 1800 daily CET change STOCKS Latest Previou Daily Change s close change in 2021 .PX Prague 1293.44 1285.49 +0.62% +25.93 00 % .BUX Budapest 51420.6 50982.1 +0.86% +22.12 3 5 % .WIG20 Warsaw <.WIG20 2296.12 2272.52 +1.04% +15.73 > % .BETI Buchares 12336.2 12220.9 +0.94% +25.81 t 0 9 % .SBITO Ljubljan <.SBITO 1150.45 1137.37 +1.15% +27.71 P a P> % .CRBEX Zagreb <.CRBEX 1939.45 1939.57 -0.01% +11.51 > % .BELEX Belgrade <.BELEX 796.76 797.46 -0.09% +6.43% 15 15> .SOFIX Sofia <.SOFIX 558.55 553.69 +0.88% +24.81 > % BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread CZ2YT= 2-year s CZ5YT= 5-year s CZ10YT s Poland PL2YT= 2-year s PL5YT= 5-year s PL10YT s FRA 3x6 6x9 9x12 3M interba nk Czech Hungary Poland Note: FRA quotes are for ask prices ***************************************************** ********* (Reporting by Jason Hovet Editing by Raissa Kasolowsky)

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