CEE MARKETS-Forint edges higher after Hungary c.bank narrows rate corridor

By Jason Hovet PRAGUE, April 26 (Reuters) - The Hungarian forint firmed slightly on Wednesday as markets digested the central bank's cut to the top end of its interest rate corridor in the previous session, paving the way to more significant rate cuts later. The central bank slashed its top rate by 450 basis points (bps) to 20.5% on Tuesday, while keeping other rates unchanged. The rate corridor helps guide interbank markets toward the policy rate, putting limits on rate-setting. The bank still maintains an 18% one-day quick deposit rate, whose introduction a half-year ago helped the forint recover from record lows beyond 430 to the euro. The forint was 0.55% stronger at 375.45 to the euro by 0847 GMT, although it remained in a tight range it weakened to last week when the bank first flagged a potential narrowing of the corridor. Deputy Governor Barnabas Virag said on Tuesday after the rate decision that the bank would exercise caution when deciding on changes to the 18% quick one-day deposit rate. "The (central bank) made it very clear what this rate cutting means, so they made the markets understood that rate cuts are not yet around the corner," a local trader said, who added the 18% rate could stay for still awhile, "effectively making the shorting of forint brutally expensive." The forint was at a one-year high past 370 last week before weakening. Policymakers around central Europe are welcoming currency gains seen so far in 2023, as they help tighten monetary conditions while the region battles inflation that remains in double digits.

They have kept rates steady since sharp tightening cycles were paused last year. Hungary's bank is performing a delicate and risky balancing act, preparing the ground for policy easing to help the stagnating economy, while inflation is still above 25%. Among other currencies, the Czech crown was steady at 23.485 to the euro, with investors' focus on a central bank policy meeting next week, where rates are likely to stay on hold, although rate setters have said a further hike is not completely off the table. Markets see rate stability over the coming months. Poland's zloty inched up 0.1% to 4.588 per euro. "In our opinion, yesterday's EUR/PLN reaching the technical resistance indicated by us, ie 4.5822, should end the strengthening of the zloty within the current appreciation trend," Bank Millennium said.

CEE SNAPSHO AT

MARKETS T 1047

CET

CURRENC

IES

Latest Previou Daily Change s

bid close change in 2023 EURCZK Czech <EURCZK 23.4850 23.4860 +0.00% +2.87% = crown =>
EURHUF Hungary <EURHUF 375.450 377.500 +0.55% +6.39% = forint => 0 0
EURPLN Polish <EURPLN 4.5880 4.5940 +0.13% +2.21% = zloty =>
EURRON Romanian <EURRON 4.9401 4.9374 -0.05% +0.05% = leu =>
EURRSD Serbian <EURRSD 117.170 117.270 +0.09% +0.11% = dinar => 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change s

close change in 2023 .PX Prague 1406.47 1413.28 -0.48% +17.04 00 % .BUX Budapest 43545.1 43476.9 +0.16% -0.57% 6 2
.WIG20 Warsaw <.WIG20 1892.35 1890.69 +0.09% +5.60% >
.BETI Buchares 12447.7 12450.9 -0.03% +6.72% t 8 6
.SBITO Ljubljan <.SBITO 1228.56 1230.28 -0.14% +17.14 P a P> % .BELEX Belgrade <.BELEX 904.62 895.82 +0.98% +9.70% 15 15>
.SOFIX Sofia <.SOFIX 608.79 610.08 -0.21% +1.21% >

Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic
CZ2YT= 2-year <CZ2YT= 5.7640 0.0390 +300bp +11bps RR RR> s
CZ5YT= 5-year <CZ5YT= 4.9780 -0.0860 +263bp -3bps RR RR> s
CZ10YT <CZ10YT 4.6660 -0.0150 +232bp +2bps =RR 10-year =RR> s

Poland
PL2YT= 2-year <PL2YT= 5.9690 -0.0140 +320bp +5bps RR RR> s
PL5YT= 5-year <PL5YT= 5.9360 0.0100 +359bp +6bps RR RR> s
PL10YT <PL10YT 5.9390 0.0020 +359bp +3bps =RR 10-year =RR> s

FORWARD

3x6 6x9 9x12 3M interba nk Czech <CZKFRA 7.19 6.80 6.10 7.18 Rep ><PRIBO

R=>

Hungary <HUFFRA 14.75 12.83 11.65 16.24 ><BUBOR

=>

Poland <PLNFRA 6.80 6.59 6.24 6.90 ><WIBOR

=>

Note: are for ask

FRA prices

quotes

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(Reporting by Jason Hovet in Prague, Boldizsar Gyori in Budapest and Alan Charlish in Warsaw; Editing by Rashmi Aich)

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