* Leu hits 1-yr peak, forint extends gains after dollar bond
* Crown misses out after rates on hold, hike looks far off
* Zloty firms to pierce key 4.0 level vs euro
* Hungary, Romania rate meetings eyed next week
(Adds new comments, prices)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, March 25 (Reuters) - The Romanian leu and
the Hungarian forint hit multi-month highs on Friday on an
improving economic outlook and after Budapest's biggest ever
foreign bond issue amid optimism over fiscal reforms.
The currencies, earlier laggards in central Europe, have
become the region's best performers, firming 2 percent this week
and about 4 percent since the end of 2010.
Both the leu <EURRON=> and the forint <EURHUF=> firmed 0.2
percent versus the euro. The leu was bid at 4.085 to the euro
and the forint at 266.30, off 11-month highs at 265.40 hit
earlier.
The Polish zloty <EURPLN=> briefly pierced the key technical
level of 4 to the euro and at 1451 GMT it was bid at 4.0, firmer
by almost half a percent from Thursday.
The leu, after steady trade for much of 2010, had slowly
built momentum in the past month before jumping this week to a
one-year high. 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 has 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 Hungary's sale of 10-year dollar bonds
worth $3 billion and 30-year bonds worth 750 million on
Thursday. []
Forint-denominated government bonds firmed further after
Thursday's strong auctions, with 3-year yields dropping 6 basis
points to 6.63 percent, the lowest since early November.
Dealers said both the forint and Hungarian bonds could firm
further based on charts. Positioning could still help the bonds
but could work against the currency in the short term, while the
euro zone's debt crisis poses risks to all assets in the region.
"Demand worth $10 billion (for Hungary's dollar bonds) is
wonderful, while we should not forget that the cost for the
state is quite high," one bond trader said.
"The other side of the story is that the debt agency itself
might have thought that it will not be able to issue more bonds
(abroad) later (and that's why they sold so much)."
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. []
Warsaw-based dealers said improved sentiment in global
markets helped the zloty, while an explanation from the
statistical office for a huge disrepancy in Poland's trade data
looked to have soothed concerns in the market. []
"There is a strong support around 3.98 and a resistance at
4.06," ING Bank Slaski currency dealer Bartlomiej Rostek said.
"It may firm past 4.0 next week, but I think the exchange rate
will stabilise ahead of the (April 4-5) central bank sitting."
RATES OUTLOOK
The crown <EURCZK=> underperformed with a 0.1 percent rise.
The Czech central bank left interest rates at record lows on
Thursday, dashing some bets that Czech policymakers would follow
Poland and Hungary in monetary tightening. []
It did not give any indication that it would rush to tighten
policy, which could keep some pressure on the safe-haven crown.
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. 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 seen
holding fire and may yet confound expectations of a cut this
year as it struggles with inflation. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.514 24.515 0% +1.98%
Polish zloty <EURPLN=> 4 4.018 +0.45% -1.05%
Hungarian forint <EURHUF=> 266.3 266.82 +0.2% +4.39%
Croatian kuna <EURHRK=> 7.383 7.383 0% -0.04%
Romanian leu <EURRON=> 4.085 4.092 +0.17% +3.62%
Serbian dinar <EURRSD=> 103.4 103.46 +0.06% +2.44%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 5bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +62bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +66bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +327bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +465bps over bmk*
5-yr T-bond HU5YT=RR -16 basis points to +433bps over bmk*
10-yr T-bond HU10YT=RR -6 basis points to +391bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 CET.
Currency percent change calculated from the daily domestic
close at 1700 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 Susan Fenton)
