CEE MARKETS-Crown firms to 10-month high, Fed meeting in focus

Anita Komuves and Jason Hovet
·4 min read

By Anita Komuves and Jason Hovet BUDAPEST/PRAGUE, Jan 27 (Reuters) - The Czech crown extended its gains on Wednesday, hitting a 10-month high and firming past the psychological level of 26 per euro a day, after comments from the central bank governor that up to two rate hikes could take place this year. The crown was up 0.24% and trading at 25.995 per euro, the strongest since mid-March 2020. "I don't see much space to get deeper below 26 as the market may be reading the comments (from Rusnok as) more hawkish then they really are," one dealer said. Central bank Governor Jiri Rusnok was quoted as saying in an interview with Bloomberg that the bank could deliver as many as two interest rate hikes this year, while moving with caution in order not to hit the fragile economic recovery. The Czech central bank has stood out in Europe as it signals it could start undoing the 200 basis points in rate cuts it took to cushion the economy when the COVID-19 pandemic first hit. The Czech Republic will hold the second bond auction of the year later today in another test of demand as the finance ministry plans a second year of high borrowing to fund record budget deficits. The Hungarian forint slid 0.06% to 359.60 per euro, extending losses from the Tuesday when it weakened after the central bank held steady on interest rates and said it would ramp up bond purchases to shore up the economy. "A weakening of the forint makes sense after comments about more QE," one FX trader in Budapest said. "There is also a slight risk-off sentiment." Trade volumes in the forint were low on Wednesday as investors were waiting for the U.S. Federal Reserve's rate meeting later in the day, two traders said. The Polish zloty was up 0.1% and trading at 4.5440 per euro. The Romanian leu was flat. Stock markets in the region were mixed, with Prague's equities down 0.47% while Budapest gained 0.33%. Warsaw's stock index weakened 0.62% while Bucharest added 0.16%. CEE SNAPSHO AT MARKETS T 1046 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech <EURCZK= 25.9950 26.0570 +0.24 +0.90% crown > % EURHUF= Hungary <EURHUF= 359.600 359.4000 -0.06% +0.87% forint > 0 EURPLN= Polish <EURPLN= 4.5440 4.5485 +0.10 +0.33% zloty > % EURRON= Romanian <EURRON= 4.8754 4.8760 +0.01 -0.21% leu > % EURHRK= Croatian <EURHRK= 7.5570 7.5635 +0.09 -0.13% kuna > % EURRSD= Serbian <EURRSD= 117.500 117.6000 +0.09 +0.06% dinar > 0 % Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1050.80 1055.770 -0.47% +2.30% 0 .BUX Budapest 43652.7 43507.13 +0.33 +3.67% 1 % .WIG20 Warsaw 1969.76 1981.98 -0.62% -0.72% .BETI Buchares 10358.1 10341.02 +0.17 +5.64% t 8 % .SBITOP Ljubljan <.SBITOP 939.76 941.61 -0.20% +4.32% a > .CRBEX Zagreb 1795.23 1791.94 +0.18 +3.22% % .BELEX1 Belgrade <.BELEX1 730.92 731.56 -0.09% -2.36% 5 5> .SOFIX Sofia 504.50 504.69 -0.04% +12.73 % Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republic CZ2YT=R 2-year <CZ2YT=R 0.2450 -0.0250 +097b -2bps R R> ps CZ5YT=R 5-year <CZ5YT=R 0.7700 -0.0430 +151b -4bps R R> ps CZ10YT= <CZ10YT= 1.2680 -0.0190 +180b -2bps RR 10-year RR> ps Poland PL2YT=R 2-year <PL2YT=R 0.0110 -0.0510 +074b -5bps R R> ps PL5YT=R 5-year <PL5YT=R 0.3660 -0.0570 +110b -5bps R R> ps PL10YT= <PL10YT= 1.1520 -0.0080 +169b -1bps RR 10-year RR> ps FORWARD 3x6 6x9 9x12 3M interba nk Czech 0.39 0.46 0.59 0.36 Rep <PRIBOR= > Hungary 0.79 0.81 0.84 0.75 Poland 0.16 0.16 0.17 0.21 Note: are for ask FRA prices quotes ********************************************* ***************** (Additional reporting by Alicja Ptak in Warsaw; editing by Uttaresh.V)

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