News
BG: Neutral – Gross external debt down 0.1% mom in September (p2)
LV: Positive – 3Q Unemployment decreases to 14.4% (p2)
TK: Neutral – MPC keeps the policy rate (the weekly repo rate) at 5.75% (p2)
Today’s Events
CZ: Nov consumer and business confidence, CZK 8bn 273d T-Bill auction / HU: Sep retail trade, (24-28) Nov consumer and business confidence / RO: Oct money supply / RU: International reserves as of 18 Nov / TK: Nov capacity utilization, Nov industrial confidence / UA: Oct money supply
EEMEA Markets
Yesterday and this morning was a clear demonstration how CEEMEA countries are using different approaches to fight currency depreciation. Our conclusion: we prefer the Turkish way and would continue to favor Turkish local markets over Poland and Hungary.
#1 Poland: the NBP again tried to intervene in the FX market to prop up the PLN. The action was however clearly unsuccessful as the EUR/PLN cross ended the day close to YTD high as the amount was probably around EUR200-300mn. We believe going forward either the BGK/NBP steps up the intervention effort or the market pressure might force a higher EUR/PLN as a broader USD appreciation in hurting all EM currencies. We would remain neutral on PLN for now and would jump on the appreciation path only in case a more significant (probably in EURbns) intervention happens.
#2 Turkey: the Central Bank of Turkey stated in yesterday statement that it will use the interest rate corridor to more actively to keep the TRY under control and target inflation. Earlier this week the CBT did not provide any repo funding for the banking sector at the policy rate but only at the top end of the O/N corridor. We believe this strategy should work to the extent that any meaningful FX pressure will translate into increased interest rate volatility at the short end.
#3 Hungary: local newspaper, Magyar Nemzet says that Hungarian authorities started an investigation about currency speculation. This follows an abrupt change in policy stance last week where EconMIn announced tha the country is looking for a new cooperation with the IMF. Although we believe the government is now under serious pressure to reach an agreement (an announcement of no deal would probably have a much more serious market impact) non market approaches to fight FX depreciation will certainly not as helpful as the Turkish tools for example. On the back of the above argument (that the govt has to reach a deal) and still heavy bearish HUF positioning we remain long EUR/HUF puts, 3M, 285 strike. Today the AKK will auction HUF30bn 12M t-bill. The amount is less than usual and this will be an important test of market sentiment.
Bottom line: we prefer the Turkish way of fighting FX depreciation and would remain O/W Turkey vs. Poland and Hungary.
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http://www.easyforexnews.net/wp-content/uploads/2011/11/EEMEA-daily-241111_MS.pdf
Gyula Toth
UniCredit Research