Currencies hesitate at multi-year highs vs dollar, leu outperforms

15 Jan, 2018

Romania was due to offer 800 million lei ($211mn) worth of one-year treasury bills and 700 million lei worth of bonds maturing in October 2021 at an auction on Monday.

Demand for Romanian debt has increased since the last quarter of 2017 when several auctions failed and yields rose steeply amid concerns that the economy may overheat.

A government spending spree last month ended a liquidity shortage in domestic markets, and the country's yields are well above regional peers.

Romania's three-year bond was trading at a yield of 3.44 percent, up 2 basis points, while corresponding Hungarian debt traded at 0.46 percent.

The leu, a regional underperformer last year, was 0.2 percent firmer at 4.626 against the euro by 1048 GMT.

"Players now focus on today's debt tenders, two tenders, and maybe demand picked up ahead of the sale," one Bucharest-based dealer said.

Still, he said he expected the leu was likely to retreat in the short term.

Last week the Romanian central bank unexpectedly raised interest rates, for the first time in a decade. It is expected to continue to tighten policy to fight rising inflation, but it also signalled it would tolerate some weakness in the leu.

The Czech crown, the Hungarian forint and the Polish zloty all treaded water versus the euro.

However, they hit multi-year highs against the dollar on Monday, as the euro continued to gain ground against the greenback, but then steadied.

The forint was trading at 251.89 versus the dollar by 1202 GMT.

"Some people may want to buy the dollar at around 252 (forints), a level which we had not seen for years," one Budapest-based currency dealer said.

The euro's gains versus the dollar were partly caused by expectations that the European Central Bank will taper its economic stimulus.

Polish and Hungarian bond yields fell slightly from Friday's close, in line with European trends.

"I do not expect much change until Thursday's (bond and central bank interest rate swap) auctions," one Budapest-based trader said.

The Hungarian central bank will launch new long-term swap tenders on Thursday to push long-term market interest rates lower.

Regional equities mostly tracked a downwards correction in Western European markets.

 

Copyright Reuters, 2018
 

 

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