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Assets fall on Brexit fear, S&P watches Polish central bank

Assets fall on Brexit fear, S&P watches Polish central bank

BUDAPEST/WARSAW: Central European assets fell on Friday amid concerns that British voters will decide in a June 23 referendum to quit the European Union, leaving poorer members with less financing from the bloc.

The zloty and the forint retreated from multi-week highs hit earlier this week against the euro, and shed 0.4 and 0.15 percent, respectively, by 0908 GMT.

“In the coming days, the zloty is unlikely to strengthen because of the approaching date of the UK referendum,” BZ WBK analysts said in a note.

Poland, after a credit rating cut from Standard & Poor’s in January, may face further downgrades due to concerns over its budget, rising burdens on its banks including a planned conversion of foreign currency mortgages, and tension with Brussels over the rule of law in Poland.

S&P’s EMEA sovereign chief Moritz Kraemer said the actions of Poland’s incoming central bank chief Adam Glapinski could be crucial to whether Warsaw avoids another downgrade.

Poland’s parliament was expected to confirm Glapinski’s appointment later on Friday.

Glapinski, who will replace outgoing governor Marek Belka from next week, has pledged to defend the bank from political interference.

Volatility could rise next week as liquidity in local markets is expected to drop with the soccer European Championship starting on Friday, some dealers said.

“Everybody will watch soccer,” one Budapest-based currency dealer said. “There are upcoming events like the British vote, but soccer will cut activity in markets.”

Risk aversion that has gripped global markets and triggered a flow of funds into safer German and US bonds also reached the region’s high-yielding debt markets on Friday, a day after bond auctions in Hungary, Poland and Romania drew robust demand.

The region’s government bond yields mostly rose by 1-2 basis points. Polish 10-year bonds traded at 3.082 percent yield, while Germany’s corresponding yield was at record lows around 0.031 percent.

The stocks of Hungarian mortgage bank FHB fell 3.7 percent to 520 forints ($1.89). The shares have shed more than 30 percent since Tuesday when the central bank fined the bank. On Thursday, police raided FHB’s headquarters.

The kuna steadied at 7.534 per euro after touching 3-month lows at 7.57 overnight as the odds that Croatia’s government will survive a coalition crisis have diminished.

An annual fall in Romania’s consumer prices accelerated to 3.5 percent in May, but the central bank is unlikely to soften its hawkish stance. It expects a fast pick-up in prices as wages surge ahead of elections late this year.

Copyright Reuters, 2016

Courtesy : BRecorder



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