* Leu hits 1-yr peak, forint extends gains after dollar bond
* Crown misses out after rates on hold, hike looks far off
* Rate meetings stay in view
(Recasts with leu, updates prices)
By Jason Hovet
PRAGUE, March 25 (Reuters) - The Romanian leu and Hungarian
forint extended gains on Friday to hit multi-month highs thanks
to an improving economic outlook and after Budapest placed
dollar bonds with investors amid optimism over fiscal reforms.
The leu <EURRON=>, after steady trade for much of 2010, had
slowly built momentum in the past month before jumping this week
to a 1-year high after the central bank said recent gains
reflected a stronger economy. []
Romania has struggled to emerge from a deep recession, but
slowly returning growth and a new International Monetary Fund
deal have put the economy on a more solid footing.
Central bank adviser Luician Croitoru said on Tuesday the
leu's level was in line with fundamentals.
The forint has joined the leu, hitting its highest levels
since April 2010 after the country's successful dollar bond sale
on Thursday, when it sold to international investors at prices
that were better than initial guidance. []
A Prague-based dealer said the forint was helped by some
flows from this, triggering stop-losses around 267 to the euro.
"Clearly the market is happy," the dealer said, adding that
on the Romanian leu "people were set up for risk aversion but it
did not happen."
The forint <EURHUF=>, the region's best performer in the
past week with a 2.9 percent rise, was bid up 0.3 percent at
266.02 to the euro by 1228 GMT.
Romania's leu <EURRON=> rose 0.4 percent to 4.077 to the
euro, while the Polish zloty <EURPLN=> added 0.2 percent.
Stock markets rose to boost currencies, led by Bucharest
<> and Budapest <>. The euro/dollar cross -- which the
region often tracks -- also steadied.
On the data front, a closely watched survey showed business
sentiment in central Europe's main trade partner, Germany, fell
less than expected in March. []
But the crown <EURCZK=> underperformed with a 0.1 percent
rise. The central bank left interest rates at record lows on
Thursday, dashing some bets that Czech policymakers would follow
Poland and Hungary in monetary tightening. []
The Czech bank on Thursday did not give any indication that
it would rush to tighten policy, which could keep some pressure
on the safe-haven crown.
"The comments from Governor Miroslav Singer did not bring
anything surprising and merely confirmed that the Czech central
bank is in no hurry to change the current interest rate
setting," Danske Bank said.
RATES OUTLOOK
The focus on rates in the region now shifts to Hungary,
where a revamped monetary policy council, expected to pay more
attention to the government's demands that it do more to support
growth, will meet for the first time on Monday.
Analysts expect no change to rates, which rose by 75 basis
points from November to January, and they are also now confident
the new council, dominated by government appointees, will not
reverse those rises in borrowing costs. []
But there are signs that the bank could consider easing
monetary policy by taking steps to provide extra liquidity to
the economy -- potentially posing a risk for the forint.
"I don't know how much longer this rally could last given
how much we have firmed over the past days," a Budapest-based
currency dealer said. "The time may be ripe for a little
correction."
Romania will also meet next week on rates, but is widely
expected to hold fire on rates and may yet confound expectations
of a cut this year as it struggles with nagging inflation.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.503 24.515 +0.05% +2.03%
Polish zloty <EURPLN=> 4.01 4.018 +0.20% -1.30%
Hungarian forint <EURHUF=> 266.02 266.82 +0.30% +4.50%
Croatian kuna <EURHRK=> 7.384 7.383 -0.01% -0.05%
Romanian leu <EURRON=> 4.077 4.092 +0.37% +3.83%
Serbian dinar <EURRSD=> 103.66 103.46 -0.19% +2.19%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
7-yr T-bond CZ7YT=RR -2 basis points to +62bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +67bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +325bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +321bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +300bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1328 CET.
Currency percent change calculated from the daily domestic close
at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Susan Fenton)
