CEE MARKETS-Currencies firm but risks in focus over recovery woes, higher Czech virus cases

BUDAPEST, October 9 (Reuters). Central European currencies strengthened on Friday. The Hungarian forint extended gains after a lower-than-expected inflation rate put pressure on the central bank in September and the trade balance hit a sizeable surplus in August. While the fall in inflation temporarily relieves the Hungarian National Bank, which is fighting inflation and exacerbating recession worries, the risks in Central Europe and emerging markets are high as COVID-19 cases rise. "The slower pace of recovery in CEE and the rising number of new COVID-19 cases will likely increase the risks," Morgan Stanley analysts said in a note. "Although we believe that the harmless inflationary pressures in September will ease some of the pressure on the (Hungarian) central bank to impose tighter monetary conditions, we think it is too early to consider realigning the one-week deposit to the base The bank raised the weeklong deposit rate by 15 basis points to 0.75% on September 25, which helped prop up the ailing forint and reverse a negative trend. On Friday, the forint rose 0.1% against the euro to 357.20 after outperforming the competition on Thursday. Hungary recorded a foreign trade surplus of 251 million euros (295.98 million US dollars) in August, exceeding analysts' forecasts for 140 million euros. The Czech koruna was also 0.1% firmer, despite daily cases of the novel coronavirus in the Czech Republic rising to 5,394 on Thursday, the third record in a row. "Thursday was a bad day for CZK rates. The long end fell 6 basis points due to disappointing retail sales, a record number of new COVID-19 cases and tighter government restrictions announced in the afternoon," announced the Komercni Banka- Trader Marek Lesko said in a morning note on Friday. The Czech government will tighten measures against corona virus starting next week, with new restrictions on sports and cultural venues and restaurants as the country grapples with a spate of new cases, Health Minister Roman Prymula said Thursday. nL8N2GZ4SK Shares were mixed, with Bucharest's blue chip index rising 0.3% while Warsaw and Budapest's index fell 1.5% and 0.7%, respectively. CEE SNAPSHOT ON MARKETS 0955 CET CURRENCIE S Last previous daily change Closing bid change in 2020 Czech 27.1600 27.1800 + 0.07% -6.36% Crown Hungary 357.2000 357.5000 + 0.08% -7.29% forint Polish 4.4800 4.4900 + 0.22% -4.99% zloty Romanian 4.87 + 0 , 02% -1.73% Leu Croatian 7.5670 7.5670 + 0.00% -1.61% Kuna Serbian 117.4600 117.5600 + 0.09% + 0.09% dinars Note: calculated from 1800 CET daily change Last previous daily change Final change in 2020 Prague 875.41 874.6800 + 0.08% - 21.53% Budapest 33460.14 33697.94 -0.71% -27.39% Warsaw 1694.25 1719 .91 -1.49% -21.20% Bucharest 8906.97 8875.47 + 0.35% -10.73% Ljubljana 835.43 836.55 -0.13% -9.77% Zagreb 1614.80 1615.94 -0.07% -19. BELEX15 692.04 691.75 + 0.04% -13.68%> Sofia 421.98 421.65 + 0.08% -25.73% Yield spread Daily (bid) change compared to Bund change in the Czech Spread Republic 2 years <CZ2YT = RR 0.0660 -0.0160 + 077 bps -2 bps> 5 -year <CZ5YT = RR 0.5780 -0.0130 + 131 bps -1 bps> 10 years <CZ10YT = R 0.9310 -0.0380 + 146 bps -3 bps R> Pola nd 2 years <PL2YT = RR 0.0240 -0.0100 + 073 bps -1 bps> 5 years <PL5YT = RR 0.5580 -0, 0060 + 129 bps + 0 bps> 10 years <PL10YT = R 1.3090 -0.0180 + 184 bps -1 bps R> FORWARD 3x6 6x9 9x12 3M interban k Czech Republic <0.29 0.29 0.34 0, 35 PRIBOR => Hungary <0.89 0.91 0.95 0.76 BUBOR => Poland <0.19 0.19 0.19 0.22 WIBOR => Note: FRA are quotations for offer prices ***** ***** ********************************************* ** ($ 1 = 0.8480 euros) (reporting by Krisztina Than; processing by Uttaresh.V)

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