Stocks, currencies fall on new variant worry; Czech rate hike bets cool

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BUDAPEST, Nov 26 (Reuters) – Central European currencies and stocks fell on Friday, hurt by a global risk-off mood triggered by a newly identified coronavirus variant found in South Africa, which prompted Asian and European countries to rush to tighten restrictions.

Stock markets in the CEE region plunged, with Warsaw (.WIG20) leading losses, dropping 3.11%. Budapest (.BUX) was 2.03% lower, while Prague (.PX) lost 1.37%. Bucharest (.BETI) fell 2%.

Among currencies, the Czech crown led losses, down 0.86% and trading at 25.732 per euro.

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The crown was pressured by the negative market mood globally as well as by dovish comments from the central bank governor on Thursday, a currency trader in Prague said.

The Czech National Bank is in a comfortable position with interest rates now and it can tighten policy further at a more moderate pace, Governor Jiri Rusnok told Reuters on Thursday, while also adding a pause at the bank’s December meeting was also possible. read more

Rate markets also scaled back expectations for a December rate hike, seeing a 25 basis point increase likely, down from earlier pricing in almost 75 bps.

Czech President Milos Zeman was taken back to hospital on Thursday after testing positive for the coronavirus, which means he will not for the time being appoint centre-right opposition leader Petr Fiala as prime minister. read more

A new coronavirus outbreak in the CEE region was also worrying markets in the region. On Friday the Czech Republic reported 27,717 new coronavirus cases, the highest daily tally since the pandemic started. read more

The Hungarian forint was down 0.66% and was trading at 367.63 per euro, giving up some of its gains from the previous session when it firmed after the central bank hiked its one-week deposit rate by 40 basis points to 2.9%. read more

“The hike could be enough to stop the forint from suffering heavy losses, but the weakening continues,” an FX trader in Budapest said. “The central bank cannot do anything about outside factors, markets need to calm down for the forint to gain.”

Long-term Hungarian government bond yields continued to drop on Friday after a fall in the previous session, while liquidity was very low, a fixed-income trader said.

The yield on the 5-year bond was 4.25%, while the 10-year yield was 4.20%. The yield on the 20-year bond was 4.10%.

The Polish zloty was 0.33% lower and was trading at 4.6880 per euro.

Central Bank Governor Adam Glapinski said on Thursday that the bank is ready to hike interest rates further to prevent persistent elevated inflation. read more

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Additional reporting by Jason Hovet and Robert Muller in Prague; Editing by Shailesh Kuber

Our Standards: The Thomson Reuters Trust Principles.

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