Crown firms as Czech inflation picks up

* Czech CPI picks up more than expected, crown firms
* Czech central banker says crown fx rates are inflationary
* U.S. data initially weigh on forint and zloty

By Sandor Peto and Marcin Goclowski
BUDAPEST/WARSAW, Sept 10 (Reuters) - The crown firmed on
Monday, outperforming most Central European peers, after Czech
inflation data showing a bigger-than-expected pick-up fuelled
expectations for rate hikes from the Czech central bank (CNB).
The zloty was flat, and the forint slightly firmer
at 0916 GMT, regaining ground after an initial weakening caused
by Friday's U.S. payroll figures which maintained the
possibility of faster Federal Reserve interest rates hikes.
Higher Fed rates make assets relatively less attractive in
Hungary and Poland where the central banks keep interest rates
at record lows.
Czech debt yields stay below U.S. levels even though the CNB
has increased its benchmark rate five times since August 2017.
But Monday's inflation figures and other Czech data showing
record vacancies in the European Union's tightest labour market
underpinned expectations for further hikes in the 1.25 percent
Annual inflation accelerated to 2.5 percent in August from
July 2.3 percent due to rising rents and utility costs, above
analysts' 2.4 percent forecast and the CNB's 2 percent target.
Czech central banker Vojtech Benda was quoted as saying on
Monday that the crown's exchange rate was developing in an
inflationary direction, meaning the currency was too weak.
The unit firmed 0.2 percent against the euro after the data
and the comments, to 25.64.
"We see a relatively high probability" that the CNB will
hike rates again at its Sept. 26 meeting, Erste analyst Jan
Zemlicka said in a note.
The bank could raise rates twice in the rest of 2018, if the
crown remains weak, and two more increases could be in the
pipeline in 2019, Zemlicka added.
Elsewhere, the leu also firmed slightly as the
central bank held a repo auction, staying though within
the past two weeks ranges.
The government is likely to sell the 5-year bonds offered at
an auction near secondary market levels around 4.34 percent, ING
analysts said in a note.
Romania is due to release August inflation data on Tuesday.
The annual figure is expected to pick up to 4.8 percent due to a
hike in household gas prices, after a slump to 4.6 percent in
July from June's 5.4 percent, the region's highest level.
Regional stocks were mostly rangebound.
Shares in the EU's biggest coking coal producer, state-run
JSW fell 8 percent after Rzeczpospolita daily reported
its Chief Executive Officer Daniel Ozon may lose his job.
The paper also quoted Ozon as saying that he faced a
pressure to invest in another state-run company - construction
firm Polimex Mostostal. The latter firm's shares rose
6.6 percent on the report, brokers said.

Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.6400 25.6800 +0.16% -0.38%
crown >
Hungary <EURHUF= 324.5500 325.0500 +0.15% -4.20%
forint >
Polish <EURPLN= 4.3100 4.3101 +0.00% -3.10%
zloty >
Romanian <EURRON= 4.6335 4.6408 +0.16% +1.00%
leu >
Croatian <EURHRK= 7.4195 7.4243 +0.06% +0.15%
kuna >
Serbian <EURRSD= 118.2600 118.3000 +0.03% +0.20%
dinar >
Note: calculated from 1800 CET

Latest Previous Daily Change
close change in 2018
Prague 1078.47 1070.200 +0.77% +0.03%
Budapest 37201.49 37189.98 +0.03% -5.53%
Warsaw 2269.74 2257.30 +0.55% -7.78%
Bucharest 8313.03 8304.71 +0.10% +7.21%
Ljubljana <.SBITOP 857.47 857.16 +0.04% +6.34%
Zagreb 1802.78 1806.53 -0.21% -2.18%
Belgrade <.BELEX1 723.65 724.72 -0.15% -4.76%
Sofia 627.52 626.99 +0.08% -7.37%
Yield Yield Spread Daily
(bid) change vs Bund change
Czech spread
2-year <CZ2YT=R 1.4760 0.1400 +203bps +13bps
5-year <CZ5YT=R 1.7800 0.0500 +199bps +3bps
10-year <CZ10YT= 2.1510 0.0310 +174bps +1bps
2-year <PL2YT=R 1.6440 0.0040 +220bps -1bps
5-year <PL5YT=R 2.6250 0.0160 +283bps +0bps
10-year <PL10YT= 3.3040 0.0170 +290bps +0bps
3x6 6x9 9x12 3M
Czech Rep 1.88 2.01 2.12 1.51
Hungary 0.57 0.78 1.00 0.20

Poland 1.76 1.81 1.84 1.71

Note: FRA are for ask prices

(Additional reporting by Luiza Ilie in Bucharest;
Editing by Alison Williams)

2018-09-10 11:44:56

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