Currencies set multi-week highs, Hungary holds robust bond sale

BUDAPEST: Central European currencies set multi-week highs on Thursday, supported by a weakening of the dollar and a Hungarian government bond auction that saw solid demand.

The forint, the zloty and the Czech crown traded firmer by more than 0.1 percent against the euro at 1401 GMT.

Dollar selling helped them earlier in the session to set multi-week highs against the euro.

But they retreated later when US economic data, showing less than expected slowdown in the fourth quarter, led a to a rise in US debt yields and the dollar index.

Fourth-quarter output figures from the region, meanwhile, confirmed robust annual growth, at 4.9 percent in Poland and 4.1 percent in Slovenia.

Even before the US data, Hungary's bi-weekly government bond tender and top-up auction drew robust demand again and led to one of the debt agency AKK's biggest ever domestic bond sales at a total 113 billion forints worth of papers.

A new series of 3-year bond with 2022 expiry attracted poor demand, but the 5- and 10-year papers on offer were well oversubscribed.

After the US output data, which pushed US debt yields higher, Hungarian yields also edged up. They rose by a few basis points, with their curve steepening.

The 10-year benchmark paper was fixed at 2.7 percent, rising 3 basis points, just like its Polish peer which traded at 2.84 percent.

Comments by Hungarian Prime Minister Viktor Orban on Wednesday that all state debt should be held by Hungarians in the longer term is unlikely to deter foreign investors, one Budapest-based trader said.

"We are still analysing what that could mean, together with the central bank's 300-page proposal (to enhance the economy's competitiveness)," the trader said.

Central European stocks were range-bound and mixed, while MSCI's emerging market share index fell 0.7 percent as hopes faded for a US-China trade deal and the US-North Korea summit brought no success.

Budapest's main index fell 0.5 percent, driven by OTP Bank shares, which briefly pierced a key resistance level at 11,850 forints ($42.73) on Wednesday but retreated to

11,710 forints on Thursday.

The Budapest-based regional bank, which reported a new acquisition on Thursday, is due to report fourth-quarter earnings early on Friday.

The leu bucked the regional firming, trading flat at 4.7408 against the euro, near 3-week highs reached on Wednesday after Romanian Finance Minister Eugen Teodorovici pledged to end uncertainty over a bank tax.

Banca Transilvania stocks, however, continued to retreat form 5-week highs, shedding 0.9 percent.