CEE MARKETS-Leu hits record low on tax worry, dovish comments hurt crown

    * Leu hits a record low again on worry over new taxes
    * Investors watch if central bank gets worried over leu
    * Fx intervention is more likely than rate hike-analysts
    * Crown weakens on dovish comments from rate setter Holub
    * Serbian central bank sells euros again to defend dinar

 (Recasts with crown fall, Serbian central bank intervention,
new analyst comment)
    By Sandor Peto
    BUDAPEST, Jan 23 (Reuters) - Worries over Romania's new
taxes sent the leu to another record low on Wednesday, while the
crown set a 3-week low after dovish comments from Czech central
bank rate setter Tomas Holub.
    The leu plunged to as low as 4.7985 versus the
euro, and was down 0.4 percent from Tuesday's close at 4.756 at
1251 GMT. Before it pierced 4.7 on Friday, some market players
had believed the central bank (NBR) would defend that line.
    Romanian assets came under pressure a month ago, when the
government announced new taxes on banks and energy firms to rein
in the rising budget deficit, triggering worries over the
business environment in the country.
    The tax on bank assets also complicated monetary policy as
it is linked to the level of interbank interest rates. Its exact
calculation formulae are not known yet.
    "It’s becoming rather obvious that the central banks’
tolerance to short-term FX volatility has increased
considerably," ING analysts said in a note.
    While the government is unlikely to withdraw the tax
measures, a sharp decline in inflation in the past months makes
a NBR interest rate hike unjustified, and with the tax linked to
interest rates, a hike could harm banks, analysts said.
    "Interest rate hikes could be a sub-optimal tool to defend
the RON (leu) given the linkage to the bank tax and the possible
negative feedback loop to market sentiment," said Societe
Generale analyst Jason Daw.
    Daw said foreign currency reserves of 36 billion euros would
allow the NBR to support the leu via market interventions.
    "However, policy inaction (not using reserves, changing
fiscal policy, or introducing other stabilisation policies)
could keep the RON under pressure as sentiment is fragile," he
    The crown hit a 3-week low at 25.713 against the
euro, to rebound to 25.695 later, still down 0.2 percent.
    Holub, a former chief of the Czech central bank's monetary
department, was quoted as saying the bank could pause its policy
tightening despite a weakness of the crown.
    "Our February’s rate hike (forecast) is now much less
certain," KBC analysts said in a note.
    The dinar was steady at 118.45 against the euro,
after the Serbian central bank continued to sell euros in the
market to support its currency.
    The currency has come under pressure from a decline in funds
sent home by Serbians working abroad and from seasonal euro
payments, rather than the risk of early elections which the
government would be poised to win. 
            CEE       SNAPSHOT   AT                         
            MARKETS             1351 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6950   25.6520    -0.17%    +0.05%
 crown      >                                       
 Hungary    <EURHUF=  318.1800  318.2800    +0.03%    +0.91%
 forint     >                                       
 Polish     <EURPLN=    4.2875    4.2845    -0.07%    +0.05%
 zloty      >                                       
 Romanian   <EURRON=    4.7560    4.7360    -0.42%    -2.14%
 leu        >                                       
 Croatian   <EURHRK=    7.4380    7.4265    -0.15%    -0.38%
 kuna       >                                       
 Serbian    <EURRSD=  118.4500  118.4700    +0.02%    -0.13%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1019.17  1016.980    +0.22%    +3.31%
 Budapest             40854.73  40963.71    -0.27%    +4.38%
 Warsaw                2389.47   2359.23    +1.28%    +4.96%
 Bucharest             7181.44   7193.28    -0.16%    -2.74%
 Ljubljana  <.SBITOP    842.74    840.12    +0.31%    +4.78%
 Zagreb                1759.25   1761.51    -0.13%    +0.60%
 Belgrade   <.BELEX1    699.05    700.53    -0.21%    -8.22%
 Sofia                  565.08    567.11    -0.36%    -4.94%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7810   -0.0030   +236bps     -2bps
   5-year   <CZ5YT=R    1.7260   -0.0110   +204bps     -2bps
   10-year  <CZ10YT=    1.8490   -0.0090   +160bps     -1bps
   2-year   <PL2YT=R    1.4000   -0.0030   +198bps     -2bps
   5-year   <PL5YT=R    2.2410    0.0020   +255bps     -1bps
   10-year  <PL10YT=    2.8520    0.0160   +261bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.14      2.19      2.22      2.01
 Hungary                  0.31      0.54      0.80      0.14
 Poland                   1.72      1.72      1.74      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Aaron Saldanha in Bangalore/Aleksandar
Vasovic in Belgrade/Luiza Ilie in Bucharest; Editing by
Alexandra Hudson and Mark Potter)

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