CEE MARKETS-Currencies rise, with focus on EU funds for Hungary and Poland

WARSAW, Jan 25 (Reuters) – Most central European currencies rose slightly on Wednesday, a day after the Hungarian central bank left interest rates unchanged. The market is still focusing on whether Poland and Hungary will achieve milestones to receive European Union funds. The Hungarian central bank held rates steady on Tuesday and said it would keep using its instruments introduced in mid-October to shore up the forint. It also raised the required reserve ratio for commercial banks to 10% from 5% from April 1. The forint EURHUF= was up 0.22% at 388.8000 per euro at 0856 GMT. Hungary’s central bank said it would hold a long-term floating rate deposit tender on Wednesday. A Budapest-based currency dealer said that some worries around the forint had eased with a substantial fall in gas prices and the market expecting a final agreement on EU funds for Hungary by the end of March, which was already priced in. “Barring some extraordinarily negative hit to the forint of the world economy, I think we can settle around 390-395 versus the euro and drift towards even stronger levels later. I think we could even reach levels of around 380 but that would require the March agreement being sealed,” he said. “Yesterday the central bank affirmed that tight monetary policy was still needed and that they are ready to act if necessary. The continued 18% level of the quick deposit rate makes speculation against the forint very expensive.” The forint has stayed on the strong side of 400 to the euro so far in 2023, well away from lows above 434 hit last October before the central bank introduced a quick deposit rate and other measures that bolstered the currency. Access to EU recovery funds also remains an important issue for the zloty, as two milestone bills necessary to obtain the money are being debated in the Polish parliament. “Despite a rise in the euro/dollar (historically positive for CEE currencies), the zloty remains under moderate pressure from sellers,” Bank Millennium analysts wrote in a daily note. They added this could be related to the delay in implementation of EU milestones and geopolitical tensions around negotiations of NATO countries on providing heavy tanks to Ukraine. “So far, the level of 4.7239 zlotys per euro remains a strong resistance limiting the scope for the depreciation of the Polish currency,” Millennium said. The zloty EURPLN= rose by 0.06% to 4.7125 per euro, while the Czech crown EURCZK= was up 0.17% at 23.8290, continuing gains seen so far in 2023. The Czech currency was supported by better market sentiment as energy prices eased and a central bank pledge to intervene against any sharp weakening in place since May 2022, which has provided the crown a strong backstop. Stock markets in the region were mixed, with Prague .PX rising 0.5% and Budapest .BUX down 0.23%. The Warsaw blue-chip index .WIG20 lost 1.23%, dragged down by banks .BNKI following media reports that the government could extend a mortgage holiday scheme. A government spokesperson said there was no decision for now on extending the scheme beyond 2023. forint EURHUF= 388.8000 389.6500 +0.22% +2.74% EURPLN= Polish zloty EURPLN= 4.7125 4.7155 +0.06% -0.49% EURRON= Romanian leu EURRON= 4.9115 4.9101 -0.03% +0.63% EURHRK= Croatian kuna EURRON=0.5305 7.5305 0.5305 0.5% +0.05% EURRSD= Serbian dinar EURRSD= 117.2600 117.3400 +0.07% +0.03% Note: daily change calculated from 1800 CET Latest Previous Daily Change close change in 2023 .PX Prague .PX 1299.87 1293.7400 +0.47% +8.17% .BUX . BUX 46793.35 46901.76 -0.23% +6.85% .wig20 Warsaw .wig20 1894.98 1918.60 -1.23% +5.75%. Zagreb .CRBEX 2109.13 2101.87 +0.35% +702.65% .BELEX15 Belgrade .BELEX15 843.96 841.96 +0 .24% +2.35% .SOFIX Sofia .SOFIX 615.45 615.34 +0.02% +2.32% Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread CZ2YT=RR 2-year CZ2YT=RR 5.6640 0.0080 +314bps +4bps CZ5YT =RR 5-year CZ5YT=RR 4.8400 -0.0340 +268bps +0bps CZ10YT=RR 10-year CZ10YT=RR 4.3930 -0.0070 +227bps +3bps Poland PL2YT=RR 2-year PL2YT=RR 6.0010 -0.1500 +348bps RR 5 -YEAR PL5YT = RR 5,8780 -0.0690 +372bps -4bps PL10YT = RR 10 -YEAR PL10YT = RR 5.9410 -0.0550 +382BPS -2bps forward 3×6 6×9 9×12 3m interbank czech rep Czkfropribor = 7.11 6. 15.99 Poland PLNFRAWIBOR= 6.92 6.84 6.41 6.93 Note: FRA quotes are for ask prices ************************************ **************************** (Reporting by Jason Hovet in Prague, Gergely Szakacs in Budapest and Anna Wlodarczak-Semczuk in Warsaw; Editing by Mark Potter) ((anna.wlodarczak@thomsonreuters.com; +48226539700; Reuters Messaging: anna.wlodarczak.thomsonreuters.com@reuters.net)) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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