Forint extends gains on expectations of interest rate hike



By Anita Komuves

BUDAPEST, May 18 (Reuters) - The Hungarian forint rose on Tuesday, strengthened by GDP data from Hungary and Romania that surprised to the upside, and extending gains from the previous session when the central bank flagged a possible rate hike in June.

"The forint is firming, but it turned around from 350 this morning, because that is a very strong technical and psychological level," a Budapest-based FX trader said.

"But the market expects further strengthening in the short- and mid-term and appreciates the ... clear communication from the central bank."

Deputy Governor Barnabas Virag said on Monday that from June the central bank will adjust short-term rates proactively to tackle rising inflation risks. The bank will hold its next rate meeting next Tuesday.

The forint EURHUF= was 0.31% stronger on the day, trading at 350.55 per euro, after briefly firming to 349.80 early in the morning.

Hungarian government bond yields were stable on Tuesday after rising on Monday on the central bank's announcement, a fixed income trader said.

On Monday short-term yields jumped about 20-30 basis points while long-term yields went up about 10 basis points.

Hungary's economy shrank by an annual 2.3% in the first quarter, better than forecasts, data showed on Tuesday.

In Romania a flash estimate also showed a smaller-than-expected contraction in GDP as the economy shrank 0.2% year-on-year. Poland last week reported a 1.2% contraction for the first quarter while the Czech economy fell 2.1%.

The Romanian leu EURRON= and the Czech crown EURCZK= edged down while the Polish zloty EURPLN= gained 0.18% on the day and was trading at 4.5275 versus the common currency.

The currency could further gain "supported by the latest increase in expectations for interest rate hikes among Central and Eastern European countries," Bank Millenium wrote.

A jump in inflation in CEE countries in April fuelled rate hike expectations in the region, but previously only the Czech central bank had been tipped by markets to hike interest rates this year.

The 10-year Polish government bond yield PL10YT=RR retreated on Tuesday after it hit 2% on Monday for the first time since March 2020.

Stocks in the region gained, with Warsaw .WIG20 leading markets by adding 1%. Prague .PX was up 0.67% while Budapest .BUX firmed 0.35%.

CEE

SNAPSHO AT

MARKETS T

1028 CET

CURRENC

IES

Latest Previous Daily

Change

bid

close

change in 2021 EURCZK= Czech

<EURCZK= 25.4400 25.4300 -0.04% +3.10%

crown

>

EURHUF= Hungary <EURHUF= 350.550 351.6500 +0.31% +3.47%

forint >

0

EURPLN= Polish <EURPLN= 4.5275

4.5355 +0.18% +0.70%

zloty

>

EURRON= Romania <EURRON= 4.9265

4.9252 -0.03% -1.25%

n leu

>

EURHRK= Croatia <EURHRK= 7.5160

7.5163 +0.00% +0.42%

n kuna >

EURRSD= Serbian <EURRSD= 117.520 117.5600 +0.03% +0.04%

dinar

>

0

Note:

calculated from

1800

daily

CET

change

Latest Previous Daily

Change

close

change in 2021 .PX

Prague

.PX

1138.15 1130.520 +0.67% +10.81

0

% .BUX

Budapes .BUX

46023.4 45862.01 +0.35% +9.30%

t

4

.WIG20 Warsaw

.WIG20 2150.43 2128.49 +1.03% +8.39% .BETI

Buchare .BETI

11652.8 11600.63 +0.45% +18.84

st

8

% .SBITOP Ljublja <.SBITOP 1085.07 1083.94 +0.10% +20.45

na

>

% .CRBEX Zagreb

.CRBEX 1946.71 1942.98 +0.19% +11.93

% .BELEX1 Belgrad <.BELEX1 757.62

759.60 -0.26% +1.20% 5

e

5>

.SOFIX Sofia

.SOFIX

520.22

520.95 -0.14% +16.24

%

Yield

Yield

Spread Daily

(bid)

change

vs Bund change

in

Czech

spread

Republi

c

CZ2YT=R

<CZ2YT=R 0.6040

0.0060 +126bp

+1bps R

2-year R>

s CZ5YT=R

<CZ5YT=R 1.5070 -0.0120 +201bp

-2bps R

5-year R>

s CZ10YT=

<CZ10YT= 1.8070

0.0000 +191bp

-1bps RR

10-year RR>

s

Poland

PL2YT=R

<PL2YT=R 0.2500 -0.0040 +090bp

-1bps R

2-year R>

s PL5YT=R

<PL5YT=R 1.4090 -0.0240 +191bp

-3bps R

5-year R>

s PL10YT=

<PL10YT= 1.9700 -0.0210 +208bp

-3bps RR

10-year RR>

s

FORWARD

3x6

6x9

9x12

3M

interba

nk

Czech

CZKFRA

0.68

1.02

1.35

0.36

Rep

<PRIBOR=

>

Hungary HUFFRA

1.20

1.42

1.55

0.85

BUBOR=

Poland

PLNFRA

0.43

0.58

0.77

0.21

WIBOR=

Note:

are for ask

FRA

prices

quotes

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

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


Additional reporting by Alan Charlish in Warsaw; editing by Barbara Lewis

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