CEE MARKETS-Battle with EU over LGBT rights, funds weigh on forint and zloty

By Anita Komuves BUDAPEST, July 16 (Reuters) – The Hungarian forint and the Polish zloty weakened on Friday, prolonging their losses, as the debate between Hungary and the European Union that could block Budapest stimulus funds weighed on the two currencies. The European Commission has launched a lawsuit against Hungary for measures which it said discriminated against LGBT people and also opened a case against Poland for self-proclaimed “areas without LGBT ideology”. The forint weakened 0.27% on the day to trade at 359.38 per euro, hitting a two-month low. “The conflict with Brussels is certainly a factor among all the other forces currently working against the forint,” said an FX trader in Budapest. The currency lost around 1% of its value this week, as the ECO currencies were also put under pressure by a risky global mood, fueled by the spread of the Delta variant of the coronavirus and higher inflationary pressures than expected in the United States. The zloty weakened 0.16% on the day to trade at 4.584 per euro. The threat that the EU could block stimulus funds for Hungary “has hit most of the region’s currencies, including the zloty,” said Adam Antoniak, economist at Bank Pekao. “Investors fear that a similar decision will also be taken in the case of Poland.” The currency weakened by more than 0.8% this week, as continued accommodative messages from the Polish central bank, coupled with rising inflation and the strengthening of the US dollar, also put the zloty under. pressure. Unlike its Czech and Hungarian counterparts, the National Bank of Poland kept rates unchanged at record highs last week, arguing that the acceleration in inflation is temporary. The Czech koruna rose 0.05% to 25.52 per euro, supported by new rate hike expectations, with data released on Tuesday showing June inflation slackened less than expected. Stocks in the region advanced, with Budapest up 0.65% and Warsaw edging up 0.1%. Shares in Prague rose 0.45%, extending their gains after hitting a 10-year high in the previous session, as shares of double-listed cybersecurity group Avast soared following the news that the company was in talks about a merger with its counterpart NortonLifeLock. SNAPSHOT OF EEC AT 1045 CURRENCIES OF CET MARKETS Last daily variation of offer closing in 2021 EURCZK = Czech EURHUF = Hungary EURPLN = Polish EURRON = Romanian EURHRK = Croatian EURRSD = Serbian Note: calculated from 1800 CET daily variation Last previous daily change in 2021 .PX Prague 1,202.49 1,197,1600 + 0.45% + 17.07% .BUX Budapest 47,990.05 47,677.82 + 0.65% + 13.97% .WIG20 Warsaw 2,262.74 2,260.49 + 0.10% + 14.05% .BETI Bucares 12,043.56 12,025.00 + 0.15% + 22.82 t% .SBITOP Ljubljan < SBITOP 1161,87 1154,92 +0,60 % +28,97 a > % .CRBEX Zagreb 1936.61 1937.76 -0.06% + 11.34% .BELEX1 Belgrade <.BELEX1 769,02 769,02 +0,00% +2,73% 5 5> .SOFIX Sofia 564.04 564.18 -0.02% + 26.03% Yield Yield Spread Daily variation (bid) vs Bund variation in the Czech Republic CZ2YT = R 2 years CZ5YT = R 5 years CZ10YT = Poland PL2YT = R 2 years PL5YT = R 5 years PL10YT = FORWARD 3×6 6×9 9×12 3M interba nk Czech 1.18 1.56 1.80 0.68 Hungary Rep 1.69 2.03 2.22 1.07 Poland 0.31 0.43 0.61 0.21 Note: are for asking prices FRA quo tes ********************************************************** *************** ***** ******** (Additional reporting by Alicja Ptak in Warsaw and Jason Hovet in Prague, editing by Sherry Jacob-Phillips)

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