* Currencies rangebound as direction sought
* Czech, Polish bond sales awaited, demand watched
(Adds data, bonds, details)
By Jason Hovet
PRAGUE, June 17 (Reuters) - The Czech crown edged higher and
Romania's leu held steady on Wednesday as central Europe's
currencies kept in ranges around the previous session's close,
unmoved by improving current account data in the region.
Markets found some relief in the Latvian parliament's
passing of sharp budget cuts late on Tuesday, opening the way
for more external aid funds to help it avoid devaluing the lat
currency, although dealers said the move was mostly priced in.
Investors are also increasingly betting on interest rate
cuts starting next week in Poland, Czech Republic and Romania,
which has hung on some on currencies this week.
By 0924 GMT the Czech crown <EURCZK=> rose in thin trade to
26.69 per euro, up 0.1 percent from Tuesday's domestic close.
Hungary's forint <EURHUF=> slipped 0.5 percent to bid at
281.75 per euro. The Polish zloty <EURPLN=> was a touch down at
4.516, while Romania's leu <EURRON=> held flat around 4.23.
The Czech current account showed a surprise surplus in
April, narrowing the 12-month deficit to 2.8 percent of 2008
gross domestic product. []
Romania's current account deficit, which has made it more
vulnerable than peers to deteriorating global credit conditions,
shrank 79 percent year-on-year in the same month. []
However, analysts took few positives from the data, saying
it reflected the sharp manufacturing falls in central Europe's
export-heavy economies due to faltering western demand.
Poland was also due to release balance data.
"The data will show current account deficits are not as high
as in the past," said Commerzbank senior strategist Lutz
Karpowitz. "The market may take this as good news; we believe it
is more a symptom of the crisis."
BOND DEMAND
Bond markets were stable, awaiting bond sales in the Czech
Republic and Poland in the afternoon, with a Czech 3-year
floater auction seen highlighting still strong demand for
shorter-term debt.
"(Czech) rates are also likely to move lower as market seems
to have been caught by recent CNB (central bank) dovish
comments," Komercni Banka dealers said in a note. "We still keep
our steepening call."
Central European currencies have fallen up to 25 percent in
the past year as the slowdown reverses years of strong growth
fuelled by foreign investment and credit. Economic worries have
limited investor flows to the region compared to emerging peers
in Asia or Latin America, strategists say.
Fears of spillover into central Europe from Latvia's
economic woes had rattled investors at the start of June,
although analysts said budget moves gave some respite.
[] []
"(This) may allow CEE currencies to unwind some of their
recent underperformance, at least in the short-term," RBC
Capital Markets wrote late Tuesday after Latvia's budget vote.
Latvian Prime Minister Valdis Dombrovskis said on Wednesday
a decision on needed loans from the European Union and
International Monetary Fund could come next week. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.69 26.72 +0.11% +0.24%
Polish zloty <EURPLN=> 4.516 4.515 -0.02% -8.88%
Hungarian forint <EURHUF=> 281.75 280.3 -0.51% -6.46%
Croatian kuna <EURHRK=> 7.265 7.267 +0.03% +1.38%
Romanian leu <EURRON=> 4.23 4.229 -0.02% -5.1%
Serbian dinar <EURRSD=> 92.977 93.476 +0.54% -3.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 132bps over bmk*
4-yr T-bond CZ4YT=RR -15 basis points to +152bps over bmk*
8-yr T-bond CZ8YT=RR +6 basis points to +281bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +7 basis points to +379bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +321bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +286bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1122 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Mike Peacock/Toby Chopra)
