* Currencies, stocks down on Greece, rate comments
* Intervention risk remains as strong FX impact weighed
* Hungarian, Romanian bond auctions smooth
* Election finale, cbank watched in Hungary
(Adds Greece's rating downgrade, Polish fixed income data)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, April 22 (Reuters) - Central European
currencies fell on Thursday, weighed down by a sovereign rating
downgrade and news of a worsening budget deficit from Greece and
rate cut talk in the Czech Republic and Poland.
Central European stocks dropped into negative territory and
currencies gave up small morning gains after European Union data
showed Greece's 2009 deficit was higher than first thought,
causing unrest among investors. []
Markets suffered another blow later when Moody's downgraded
Greece by one notch, saying it may lower its rating further
[]. Losses were limited though by news that Greece
may get a short-term bridge loan from European countries.
Data for other EU countries mostly confirmed previously
reported budget deficits, though Ireland's gap was also revised
upward. []
Polish central bank minutes showing some rate-setters
believed interest rate cuts should be considered to rein in
excessive gains in the zloty caused the unit to dip to 3.8824
per euro from 3.8756 in an initial reaction. []
Central banker Vladimir Tomsik said there was room to cut
interest rates in the Czech Republic as well as a recent rise in
the crown threatened the country's inflation target and growth
prospects. []
The crown <EURCZK=> weakened to 25.412 per euro by 1508 GMT
from 25.33 before the comments. It traded 0.5 percent down on
the day, while the zloty <EURPLN=> was down 0.4 percent and
Hungary's forint <EURHUF=> was 0.5 percent lower.
The Polish central bank surprised markets on April 9 with
the first market intervention in 10 years to knock the zloty off
16-month peaks, and cooling markets since. Romania's central
bank was also suspected to have intervened and now analysts see
chances growing to see similar moves elsewhere.
"There are three main ways in which policymakers could try
to weaken the (crown)," Capital Economics said in a note,
mentioning verbal intervention, rate cuts and currency
purchases.
"The third option (is) the one that policymakers are perhaps
most likely to adopt. But while FX purchases have helped limit
previous bouts of ... appreciation, ... policymakers have not
been able to swim against the tide of the market for long."
SMOOTH AUCTIONS
Emerging EU assets -- backed by the region's relatively
upbeat growth outlook and lower debt loads -- have stayed mostly
immune to the problems of the debt-laden euro zone periphery,
with bond yields dropping to multi-year lows this month.
Hungary smoothly sold 55 billion forints and Romania found
buyers for 700 million lei in bonds on Thursday, following up
Czech and Polish bond tenders that saw bids at twice the offer
at Wednesday auctions. [].
Yields at both auctions dropped from previous sales, but
Hungary's were higher than market rates on Wednesday.
"I think this is the end of the rally for now," a Budapest
bond dealer said.
Bond markets in both countries have been supported by rate
cuts this year, while Romania also got a boost from a resumption
of its IMF deal after a pause caused by a 2009 political crisis.
Romania's IMF representative said the country will likely
ask the Fund to accept a wider budget gap target next week, news
that unnerved investors and hit the leu <EURRON=>, which later
recovered to trade a touch lower on the day [].
Hungary is expected to cut rates by another 25 basis points
on Monday, a day after an election run-off in which the Fidesz
party looks close to winning the two thirds parliamentary
majority it needs to push through vital reforms. []
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.412 25.279 -0.52% +3.57%
Polish zloty <EURPLN=> 3.881 3.865 -0.41% +5.75%
Hungarian forint <EURHUF=> 265.22 263.87 -0.51% +1.93%
Croatian kuna <EURHRK=> 7.255 7.251 -0.06% +0.75%
Romanian leu <EURRON=> 4.137 4.133 -0.1% +2.43%
Serbian dinar <EURRSD=> 99.55 99.24 -0.31% -3.69%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -36 basis points to 56bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +65bps over bmk*
10-yr T-bond CZ10YT=RR +4 basis points to +62bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +350bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +293bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +242bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +428bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +366bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +337bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1808 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; Editing by John Stonestreet)
