CEE MARKETS-Forint pulls back from nine-month peak as central bank meets on rates

By Jason Hovet and Gergely Szakacs PRAGUE, Feb 28 (Reuters) - Hungary's forint eased on Tuesday, but remained just off a nine-month high, with markets expecting the central bank to keep interest rates at high levels even as the government calls for easier policy. Hungarian Prime Minister Viktor Orban's top economic aide piled pressure on the central bank on Tuesday to start lowering interest rates, saying current borrowing costs were "extremely onerous" for the economy, which is slowing sharply. "I can only hope that the NBH (National Bank of Hungary) starts lowering interest rates as soon as possible and will not remain overly cautious," Economic Development Minister Marton Nagy was quoted as saying by news website index.hu. The forint has gained over 5% so far in 2023, supported by the European Union's highest interest rates, with the central bank's base rate at 13%.

Hopes of European Union funds being unlocked from a rule-of-law dispute with Brussels are also boosting the currency. The forint dropped half a percent on Tuesday, trading still on the strong side of 380 to the euro, with markets turned towards the central bank's rate meeting. All 16 economists polled between Feb. 20 and 24 said the NBH would leave rates on hold after an inflation rise in January. "While we have noted some improvement in Hungarian core inflation dynamics in recent months, whichever definition of policy rate we want to use, the real interest rate works out to deeply negative. This keeps the exchange rate vulnerable," Commerzbank economist Tatha Ghose said.

"At this very time, inflation worries are escalating and the euro is weakening – we see no reason why the central bank would wish to make a dovish change to its policy or tone." Elsewhere, the Czech crown held onto recent gains, sitting around 14-year highs, firmer after producer price data surprised on the upside. Stock markets were mostly down, tracking European peers lower as euro zone inflation worries weighed.

CEE SNAPSHO AT

MARKETS T 0950

CET

CURRENC

IES

Latest Previou Daily Change s

bid close change in 2023 EURCZK Czech <EURCZK 23.6120 23.6270 +0.06% +2.31% = crown =>
EURHUF Hungary <EURHUF 379.500 377.650 -0.49% +5.25% = forint => 0 0
EURPLN Polish <EURPLN 4.7205 4.7160 -0.10% -0.66% = zloty =>
EURRON Romanian <EURRON 4.9210 4.9245 +0.07% +0.44% = leu =>
EURHRK Croatian <EURHRK 7.5330 7.5365 +0.05% +0.05% = kuna =>
EURRSD Serbian <EURRSD 117.240 117.295 +0.05% +0.05% = dinar => 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change s

close change in 2023 .PX Prague 1402.54 1402.73 -0.01% +16.71 00 % .BUX Budapest 44778.0 44940.0 -0.36% +2.25% 6 3
.WIG20 Warsaw <.WIG20 1824.63 1820.79 +0.21% +1.82% >
.BETI Buchares 12283.1 12307.5 -0.20% +5.31% t 5 1
.SBITO Ljubljan <.SBITO 1199.79 1202.44 -0.22% +14.40 P a P> % .BELEX Belgrade <.BELEX 869.65 878.85 -1.05% +5.46% 15 15>
.SOFIX Sofia <.SOFIX 626.42 626.30 +0.02% +4.14% >

Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic
CZ2YT= 2-year <CZ2YT= 5.8650 -0.2930 +272bp -37bps RR RR> s
CZ5YT= 5-year <CZ5YT= 5.2570 0.0230 +252bp -5bps RR RR> s
CZ10YT <CZ10YT 4.9480 0.0960 +230bp +3bps =RR 10-year =RR> s

Poland
PL2YT= 2-year <PL2YT= 6.3750 -0.0590 +323bp -14bps RR RR> s
PL5YT= 5-year <PL5YT= 6.5750 0.0660 +384bp -1bps RR RR> s
PL10YT <PL10YT 6.6400 0.0810 +399bp +2bps =RR 10-year =RR> s

FORWARD

3x6 6x9 9x12 3M interba nk Czech <CZKFRA 7.23 7.12 6.63 7.21 Rep ><PRIBO

R=>

Hungary <HUFFRA 14.93 13.47 11.82 16.28 ><BUBOR

Poland <PLNFRA 7.02 7.03 6.78 6.94 ><WIBOR

Note: are for ask

FRA prices

quotes

********************************************

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(Reporting by Jason Hovet in Prague and Gergely Szakacs in Budapest Editing by Mark Potter)

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CEE MARKETS-Forint pulls back from nine-month peak as central bank meets on rates

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