CEE MARKETS-Fed's rate pause signal props up CEE currencies

BY Reuters | ECONOMIC | 03/23/23 07:18 AM EDT
       By Karol Badohal
       Warsaw, March 23 (Reuters) - Hungary's forint led
Central Europe's currency gains on Thursday after the U.S. Fed
signalled a likely pause on rate hikes, weakening the dollar and
boosting appetite for riskier assets.
    In a widely expected move, the Fed raised interest rates by
25 basis points on Wednesday, but recast its outlook to a more
cautious stance after the collapse of two regional banks in the
United States stoked fears of a banking sector crisis.
    The Fed shift would align more with central Europe, where
policymakers having been holding steady on policy since last
year after sharp hiking cycles started earlier than global peers
like the Fed or ECB.
    A widening rate differential has put some pressure on
    Markets see rates in the Czech Republic and Hungary staying
unchanged at policy meetings next week as rate setters there
show no willingness at the moment to hurry into rate cuts even
as their economies tipped into recession at the end of 2022.
    "We expect central banks in Czechia and Hungary to stick
with relatively hawkish messaging at their meetings next week,
which may be a further positive for CEE FX too," said Nicholas
Farr, emerging Europe economist for Capital Economics.
    "That said, the outlook for CEE currencies hinges in large
part on what happens to global risk appetite," he added.
   A US recession would put CEE currencies on the back foot,
while a re-escalation of concerns about the health of the global
banking system could lead to a sharp weakening of capital
inflows to emerging markets, leaving CEE currencies heavily
exposed, Farr noted.
    Currencies have rebounded from sharp losses seen at the
start of the week in the wake of Credit Suisse's takeover by
Swiss rival UBS.
    The Hungarian forint was up almost 1% at 384.05
per euro by 1047 GMT on Thursday. The Czech crown
gained 0.15%.
    "There was a decent boost overnight (after the Fed) but it
is getting calmer now," a Prague-based FX trader said.
    Noble Securities analysts wrote in a note that worse
economic data or first-quarter corporate earnings could become
"an argument for a 'cold shower'" for the zloty later.
    The Polish zloty has trailed gains of main CEE
movers the forint and crown this year, and was up a touch at
4.682 to the euro, holding roughly steady so far in 2023.

                   CEE      SNAPSHO   AT
                   MARKETS  T        1147
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2023
 EURCZK  Czech     EURHUF  Hungary   0        0
 EURPLN  Polish    EURRON  Romanian  EURHRK  Croatian  EURRSD  Serbian   0        0
         Note:     calcula                    1800
         daily     ted                        CET
         change    from

                            Latest   Previou  Daily    Change
                                     close    change   in 2023
 .PX     Prague             1316.42  1328.68   -0.92%   +9.54%
 .BUX    Budapest           42196.5  41962.4   +0.56%   -3.65%
                                  2        5
 .WIG20  Warsaw    .BETI   Buchares           12077.8  12042.0   +0.30%   +3.55%
         t                        3        3
 .SBITO  Ljubljan  %
 .BELEX  Belgrade  .SOFIX  Sofia     Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  s
 CZ5YT=    5-year  s
 CZ10YT            s
 PL2YT=    2-year  s
 PL5YT=    5-year  s
 PL10YT            s
                            3x6      6x9      9x12     3M
         Czech     Hungary   Poland    Note:     are for
         FRA       ask
         quotes    prices

 (Reporting by Karol Badohal in Warsaw, Jason Hovet in Prague
and Krisztina Than in Budapest; Editing by Nivedita

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