(Adds details, stocks, fixed income)
By Jason Hovet
PRAGUE, Feb 18 (Reuters) - The Polish zloty gave up early
gains on Wednesday as central Europe remained under heavy
pressure due to poor economic outlooks, while policymakers
scrambled to protect their tumbling currencies.
The zloty, Czech crown and Hungarian forint fell to
multi-year or record lows this week, hurt also by fears about
the region's foreign debt reliance. This sent officials to look
at methods other than direct intervention to stop the falls
which have hit companies, banks and citizens that borrowed in
foreign currencies.
Poland's government said on Tuesday it could sell EU funds
through the market if the zloty fell to 5.0 per euro, the
bluntest verbal intervention during a seven-month slide that has
wiped out a third of the zloty's value against the euro.
[]
Czech central bank Vice-Governor Miroslav Singer said on
Wednesday the bank could end a 200-basis-point easing cycle and
raise interest rates following a 6 percent drop in the crown
since its last policy meeting two weeks ago. []
Falling interest rates to boost weak economies have added to
currencies' decline, while Polish companies have suffered from
currency option deals which went sour after the zloty reversed
from record highs in August. []
The zloty <EURPLN=> dropped to 4.909 percent, down 0.6
percent from Tuesday's domestic close and again trading near an
all-time low. However, the crown <EURCZK=> rose 0.3 percent to
29.428 to the euro by 1017 GMT.
"Policymakers are starting to get worried," Calyon currency
strategist Stuart Bennet said. "The problem at the moment,
though, is what is driving this (fall) is something they cannot
control, i.e. risk. Markets have got very worried over the
direction central and eastern Europe is going."
LONG WAY DOWN
The zloty has plunged 31.8 percent since Sept. 1, leaving
many companies to report losses on currency options contracts.
In Hungary the forint <EURHUF=> dropped 0.8 percent, nearing
a record low of 310 per euro hit on Tuesday. It has dropped 22.3
percent since September, while the crown is down 15.6 percent
and Romania's leu <EURRON=> 18.1 percent.
Hungarian Prime Minister Ferenc Gyurcsany said on Wednesday
he had asked the central bank and finance ministry to explore
unconventional means of defending the currency. []
Analysts have expected central banks to change their tone on
interest rates or even raise them to boost their currencies --
despite worsening data showing a hard landing for the region's
export-heavy economies.
Two rating agencies said on Tuesday the ratings of emerging
European banks and their western owners could suffer in the
recession, sparking a selloff led by banks. []
Stocks on Wednesday continued a heavy slide, with Prague
<> and Budapest <> down 5 percent and Warsaw <> 3
percent. []
Polish bonds weakened further on Wednesday but other markets
quietened down after steep price drops this week which were
similar to when markets seized up last October.
"It's the same as it was last October, when the market froze
completely," a Budapest dealer said. "Anything is possible,
yields can move 50 points up, 50 points down."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 29.428 29.508 +0.27% -9.09%
Polish zloty <EURPLN=> 4.909 4.88 -0.59% -16.17%
Hungarian forint <EURHUF=> 308.11 305.51 -0.84% -14.46%
Croatian kuna <EURHRK=> 7.475 7.47 -0.07% -1.47%
Romanian leu <EURRON=> 4.294 4.301 +0.16% -6.51%
Serbian dinar <EURRSD=> 94.42 93.829 -0.63% -5.23%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 191bps over bmk*
4-yr T-bond CZ4YT=RR +24 basis points to +227bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +304bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +470bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +401bps over bmk*
10-yr T-bond PL10YT=RR +15 basis points to +340bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +1184bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +1043bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +865bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1119 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 Jason Hovet; editing
by David Stamp)
