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CEE MARKETS-Zloty starts week stronger, Polish and Romanian central banks in focus

Kitco News

By Krisztina Than

BUDAPEST, Feb 5 (Reuters) - Poland's zloty led Central European currencies higher on Monday despite a sell-off in local stock markets, with investors eyeing the meetings of the Polish and Romanian central banks this week for signs of tighter monetary policies.

The Polish bank is likely to keep its benchmark interest rate at its record low of 1.50 percent after inflation slowed in December, then raise rates in the first quarter of 2019, a Reuters poll showed on Friday .

After years of monetary easing that helped boost the region's fast-growing economies, the Czech and Romanian central banks had already started raising rates, in a bid to curb inflationary pressures.

Polish and Hungarian rate-setters, however, have maintained their dovish stance, and that is not expected to change when the Polish bank meets on Wednesday.

"As additional labour supply from the Ukraine continues to keep a lid on Polish wage pressure, we believe that the NBP will raise the policy rate in Q3 2019 at the earliest," Barclays said in a note.

The National Bank of Hungary, the region's most dovish central bank, expects to leave its base rate at 0.9 percent until the end of 2020 . But some analysts said the bank would not be able to sail against global winds for long.

"The NBH will not be able to pursue its policy independently of the main global central banks: the Fed and the ECB. This means that if winds change suddenly in markets, the NBH will have to be very vigilant for the Hungarian economy to withstand the waves," Gergely Urmossy, an analyst at Erste, said in a note.

The forint , which is supported by Hungary's large current account surplus, traded at 309.88 to the euro at 0919 GMT, steady from Friday.

The Polish zloty was 0.2 percent higher.

The Czech crown was steady after last week's meeting of the Czech central bank, which raised interest rates for a third time and signalled another increase this year.

The Romanian leu traded higher before the central bank meets on Wednesday.

Romania's bank raised its benchmark interest rate by a quarter point to 2 percent for the first time in a decade at its Jan. 8 meeting, as it faces expansionary fiscal and income policies and inflation risks.

Central European stock markets eased in early trade, with Budapest leading losses. The Hungarian index fell one percent as investors assessed the outlook for global monetary policy after a strong U.S. jobs report on Friday caused bond yields to surge on the prospects of rising inflation.

CEE SNAPSHOT AT

MARKETS 1019 CET

CURRENCI

ES

Latest Previous Daily Change

bid close change in 2018 Czech 25.2250 25.2140 -0.04% +1.26% crown Hungary 309.8800 310.0000 +0.04% +0.33% forint Polish 4.1574 4.1648 +0.18% +0.46% zloty Romanian 4.6410 4.6475 +0.14% +0.83% leu Croatian 7.4300 7.4325 +0.03% +0.00% kuna Serbian 118.5800 118.6100 +0.03% -0.07% dinar Note: calculated from 1800 CET daily change

Latest Previous Daily Change

close change in 2018 Prague 1122.40 1129.100 -0.59% +4.10%

0 Budapest 39508.34 39951.46 -1.11% +0.33% Warsaw 2494.60 2507.24 -0.50% +1.36% Bucharest 8145.37 8243.25 -1.19% +5.05% Ljubljana 827.72 826.28 +0.17% +2.65% Zagreb 1881.46 1877.70 +0.20% +2.09% Belgrade <.BELEX15 777.62 777.07 +0.07% +2.35%

> Sofia 712.62 719.71 -0.99% +5.19%

BONDS

Yield Yield Spread Daily

(bid) change vs Bund change

in Czech spread Republic 2-year <CZ2YT=RR 0.6410 0.0790 +120bps +10bps

> 5-year <CZ5YT=RR 1.1520 0.0690 +116bps +9bps

> 10-year <CZ10YT=R 1.7730 -0.0290 +104bps -1bps

R> Poland 2-year <PL2YT=RR 1.7590 0.0000 +232bps +2bps

> 5-year <PL5YT=RR 2.7740 -0.0110 +278bps +1bps

> 10-year <PL10YT=R 3.5300 -0.0330 +279bps -1bps

R>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban

k Czech Rep < 1.02 1.16 1.37 0.91

PRIBOR=> Hungary < 0.06 0.10 0.17 0.02

BUBOR=> Poland < 1.75 1.78 1.88 1.72

WIBOR=> Note: FRA are for ask prices quotes ************************************************** ************


(Reporting by Krisztina Than in Budapest, Marcin Goettig in Warsaw and Radu Marinas in Bucharest, editing by)

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