* Crown flat, others drop as Czech cbank seen holding rates
* Hungary expected to sell bonds easily at biweekly auction
* Poland's cbank minutes due out at 1200 GMT
(Adds bonds, updates markets)
By Marton Dunai
BUDAPEST, Sept 23 (Reuters) - The Czech crown bucked losses
in East European currencies on Thursday even as the central bank
was expected to keep interest rates on hold in Prague, while
bond auction in Hungary was expected to go well thanks to solid
demand.
Hungary's forint led regional gains earlier this week after
the U.S. Federal Reserve raised expectations it would implement
more easing to support the economy, which wet investors'
appetite for riskier emerging market assets.
Currencies corrected somewhat on Thursday, with the crown,
the region's top performer by far this year, holding steady.
In a decision due at 1100 GMT, the Czech central bank is
expected to keep its key rate at a record low of 0.75 percent
<CZCBIR=ECI>, the third-lowest in Europe, according to a
unanimous Reuters poll of analysts. []
More than the rate decision, investors will eye the bank's
comments for clues on the timing of a possible rate hike.
"The comments after the meeting will prove interesting given
that some CNB board members were recently calling for an early
rate hike," Danske Bank said in a note to clients. "We believe
that the CNB will remain fairly neutral."
The Czech government on Wednesday approved a 2011 budget
draft that would lower the deficit to 4.6 percent of GDP from
5.3 percent expected this year. Analysts said that meant less
need for tighter monetary conditions. []
"The Czech Republic is among those countries with a more
convincing recovery story," UniCredit said. "We do not expect
any hikes before spring 2011. Moreover, no central bank in the
region is rushing to hike rates."
The Czech crown <EURCZK=> was flat at 0831 GMT. The Polish
zloty <EURPLN=> led losses with a half-percent drop against the
euro, while the Hungarian forint <EURHUF=> eased 0.3 percent and
the Romanian leu <EURRON=> 0.2 percent.
Aside from regional factors, U.S. housing market data due at
1400 GMT, will also shape sentiment, dealers said.
HUNGARY AUCTION EYED
Hungary auctions 50 billion forints ($240.2 million) worth
of government bonds on Thursday <HUISSUE>. A dealer said demand
looked healthy and the sale would likely be a breeze.
"It will sell like candy," he said. "They might even raise
the offering, demand is so strong."
Hungary also nearly doubled its bond offer two weeks ago as
investors were emboldened by a government pledge to comply with
European Union budget deficit requirements. []
A successful sale on Thursday could lend support to the
forint, albeit only temporarily, dealers said. The next
resistance is at EUR/HUF at 278, a five-week low.
In Romania, President Traian Basescu said the country aimed
to seal a new precautionary deal with the International Monetary
Fund in April and cover its 2011 deficit with international and
domestic debt offerings. []
Dealers said the leu was probably on a slight firming trend
as the central bank could step in to prevent any drop beyond
about 4.27 per euro.
At 1200 GMT Poland's central bank releases minutes from an
August sitting of the Monetary Policy Council but the minutes
usually have little, if any, impact on the markets.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.578 24.58 +0.01% +7.08%
Polish zloty <EURPLN=> 3.968 3.949 -0.48% +3.43%
Hungarian forint <EURHUF=> 279.5 278.71 -0.28% -3.27%
Croatian kuna <EURHRK=> 7.287 7.283 -0.05% +0.3%
Romanian leu <EURRON=> 4.266 4.258 -0.19% -0.67%
Serbian dinar <EURRSD=> 105.33 105.4 +0.07% -8.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +18 basis points to +84bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +99bps over bmk*
10-yr T-bond CZ9YT=RR +6 basis points to +100bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +396bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +374bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +317bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +6 basis points to +589bps over bmk*
5-yr T-bond HU5YT=RR +7 basis points to +549bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +464bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1031 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai)
