Leu eases though CPI remains high; dollar rebound hits forint

* Currencies fall in profit-taking after rally
* Romania's May inflation higher than expected
* Romanian central bank could tighten leu liquidity

(Adds dollar rebound, zloty/forint, Czech auction result,
Croatian euro bond)
By Sandor Peto
BUDAPEST, June 12 (Reuters) - Central European currencies
and stocks mostly fell as risk aversion increased amid the
threat of the U.S.-China trade war and the dollar regained some
ground after U.S. inflation data.
The leu did not benefit from higher-than-expected May
inflation. The crown also weakened after Tuesday's
Czech inflation data showed a pick-up, even though it regained
some ground on Wednesday.
The region's main currencies have risen to multi-week or
multi-month highs against the euro in recent weeks as
expectations for Federal Reserve interest rate cuts led to a
selling of the dollar.
The dollar's cautious rebound on Wednesday mainly affected
the forint, which is unlikely to receive support from a meeting
of the National Bank of Hungary on June 25, dealers said.

The forint fell 0.3% against the euro to 321.9 by
1423 GMT.
The zloty firmed slightly versus the euro, and
continued to rebound against the Hungarian unit,
firming through 75.5.
Romania's leu shed 0.1% against the euro.
Remaining near five-month highs, it traded at 4.724.
"This easing is not big, and following the past weeks'
surge, it is normal," one Budapest-based dealer said.
Romania's annual inflation was steady at 4.1% percent in
May, above the central bank's 1.5% to 3.5% target range and
forecasts.
Inflation could retreat slightly by the year-end. But the
central bank will need to fight high core inflation, using its
variable rate tenders to stem a likely rise in liquidity in leu
markets in the coming months, ING Bank said in a note.
"Given the global context, the probability for rate hikes
... is very low," the note said.
Romanian bonds were mixed, with the yield on two-year debt
bid lower by 5 basis points at 3.46% and the 10-year yield
rising 9 basis points to 4.75%, while Poland's 10-year yield
dropped 4 basis points to 2.485%.
Expected continuing loose monetary policy in the euro zone
also fuels uncertainty over Czech interest rates.
Czech forward rate agreements price in rate cuts, but some
analysts believe the Czech central bank's next move will be its
ninth rate increase since 2017, in a bid to fight inflation.
Czech government bonds drew solid demand at an auction.
Supply can dry up in the summer, Komercni Banka traders said in
a note ahead of the sale.
A drop in primary supply is also a risk in Hungary, which
sold 529 billion forints ($1.87 billion) worth of a new
high-yield retail savings bond in a week, the biggest weekly
outflow ever recorded.
"The debt agency AKK will want to see how it goes in the
next weeks, and if they change financing policy, more FX bond
repurchases is one of the options," one Budapest-based bond
trader said.
A 10-year euro-denominated bond launched by Croatia was
robustly oversubscribed on Wednesday.
CEE SNAPSHOT AT
MARKETS 1623 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2019
Czech <EURCZK= 25.6080 25.6240 +0.06% +0.39%
crown >
Hungary <EURHUF= 321.9000 321.0500 -0.26% -0.25%
forint >
Polish <EURPLN= 4.2580 4.2628 +0.11% +0.74%
zloty >
Romanian <EURRON= 4.7245 4.7201 -0.09% -1.49%
leu >
Croatian <EURHRK= 7.4125 7.4135 +0.01% -0.03%
kuna >
Serbian <EURRSD= 117.8800 118.0100 +0.11% +0.36%
dinar >
Note: calculated from 1800 CET
daily
change

Latest Previous Daily Change
close change in 2019
Prague 1050.14 1061.890 -1.11% +6.44%
0
Budapest 40582.11 41234.66 -1.58% +3.69%
Warsaw 2274.22 2295.60 -0.93% -0.11%
Bucharest 8608.22 8633.12 -0.29% +16.58%
Ljubljana <.SBITOP 870.54 871.97 -0.16% +8.24%
>
Zagreb 1912.85 1910.46 +0.13% +9.38%
Belgrade <.BELEX1 731.10 731.70 -0.08% -4.02%
5>
Sofia 578.63 580.34 -0.29% -2.66%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 1.5900 0.0150 +225bps +2bps
R>
5-year <CZ5YT=R 1.5040 -0.0260 +210bps -2bps
R>
10-year <CZ10YT= 1.6520 0.0060 +189bps +1bps
RR>
Poland
2-year <PL2YT=R 1.6640 0.0100 +233bps +1bps
R>
5-year <PL5YT=R 2.0280 -0.0090 +262bps +0bps
R>
10-year <PL10YT= 2.5070 -0.0420 +274bps -4bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 2.16 2.06 1.97 2.17
<PRIBOR=
>
Hungary 0.29 0.40 0.53 0.18

Poland 1.73 1.72 1.71 1.72

Note: FRA are for ask prices
quotes
*************************************************
*************

(Additional reporting by Radu Marinas in Bucharest, Jason Hovet
in Prague and Alicja Ptak in Warsaw; editing by Larry King and
Gabrielle Tétrault-Farber)



First Published: 2019-06-12 11:25:53
Updated 2019-06-12 17:22:06


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