* Dollar drop boosts FX, stocks
* Hungary holds interest rates flat, comments awaited
* Leu leads as govt survival chances improve
(Updates with Hungary rates, adds Czech details)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Oct 25 (Reuters) - The Romanian leu rose on
Monday as the odds on Bucharest surviving a no-confidence vote
improved and as a weaker dollar pushed investors back into
emerging market assets.
The Polish zloty jumped 1 percent while the Hungarian forint
hit a 1-1/2 week high ahead of central bank comments due later
after the bank kept interest rates at record lows. A Reuters
poll showed the market expects rates to remain at current levels
until the end of 2011. []
Emerging European assets were lifted on Monday after a Group
of 20 meeting over the weekend stopped short of firm policy
initiatives to counter global currency and macroeconomic
imbalances, leaving market trends unchanged. []
That pushed the dollar down broadly and prompted investors
to seek higher yields in emerging market assets. Central
European stock markets rose by up to 1.2 percent on Monday,
boosting currencies.
By 0838 GMT, the zloty <EURPLN=> was bid up 0.9 percent at
3.932 per euro, while the forint <EURHUF=> added 0.5 percent and
the leu <EURRON=> was up 0.8 percent. The region's top performer
this year, the Czech crown <EURCZK=>, was steady.
The leu got an additional boost from Romanian opposition
politicians' comments over the weekend that made it look less
likely the government would lose a no-confidence vote scheduled
for Wednesday.
The leader of the second-largest opposition party, Crin
Antonescu, was quoted as saying in Romania Libera that there was
a 55 percent chance Prime Minister Emil Boc's cabinet would
survive.
"Those who entered long euro/leu ahead of the
(no-confidence) motion are taking stop losses," one
Bucharest-based dealer said.
Boc's fragile, 10-month-old coalition government is
struggling to impose tough economic medicine agreed in exchange
for an IMF-led 20 billion euro bailout as public opposition to
austerity measures rises and his party's popularity sinks.
In the Czech Republic, markets showed little reaction to a
weekend Senate election that gave the opposition Social
Democrats a majority, allowing it to delay -- but not stop --
budget austerity measures. []
TAX INITIATIVES
Markets were awaiting the Hungarian central bank's first
comments on government tax initiatives to plug budget gaps.
Interest rates in Hungary have been on hold since April after an
easing cycle that brought the main rate down to 5.25 percent.
"In the medium term, the key question is whether the budget
balance is sustainable, and whether the planned tax cuts have an
effect in boosting demand and fuelling inflation," said Gyorgy
Barcza with K&H Bank. "It will be interesting to see what the
central bank thinks about that."
Hungary's government seeks to trim its budget deficit to
below the European Union ceiling of 3 percent of gross domestic
product next year, but its tax plans and a move to intervene in
the partially privatised pension system have worried investors.
[]
The forint has eased about 1.7 percent since hitting a
five-month high at the start of October. Last month, Hungary's
central bank warned it might raise rates if investor sentiment
to the country worsened, but said 2011 budget details could help
quell such a risk.
The Polish central bank announces its monthly rate decision
on Wednesday and is expected to leave borrowing costs at a
record low of 3.5 percent.
The market widely expects the bank to raise rates by a
modest 25 basis points by the end of the year as inflation has
jumped to the central bank's target.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.512 24.525 +0.05% +7.37%
Polish zloty <EURPLN=> 3.932 3.969 +0.94% +4.37%
Hungarian forint <EURHUF=> 273.62 275.11 +0.54% -1.2%
Croatian kuna <EURHRK=> 7.337 7.334 -0.04% -0.38%
Romanian leu <EURRON=> 4.266 4.299 +0.77% -0.67%
Serbian dinar <EURRSD=> 106.42 106.36 -0.06% -9.9%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 81bps over bmk*
7-yr T-bond CZ7YT=RR +7 basis points to +78bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +102bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1425 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Jason Hovet; Editing by Ruth Pitchford and Susan Fenton)
