* 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) - Central European
currencies jumped on Monday as a weaker dollar pushed investors
towards emerging market assets, and growing signs Romania's
government will survive a no-confidence vote underpinned the
leu.
A Group of 20 meeting over the weekend stopped short of firm
policy initiatives to counter global currency and macroeconomic
imbalances, leaving market trends that favoured selling the
dollar for emerging market assets unchanged. []
Investors have used the weaker dollar to seek higher
emerging yields. Central European stock markets rose by up to
1.8 percent <> on Monday, boosting currencies.
The Polish zloty rose more than 1 percent while the
Hungarian forint hit a 1-1/2 week high, with the country's
central bank keeping interest rates on hold for a sixth month as
expected but warning of risks for inflation and markets.
[]
Gains for the forint after government promises to bring down
the deficit to below the EU's ceiling of 3 percent of gross
domestic product have been a boon for Hungarian rate setters.
But the currency has dropped back since details of the
fiscal plans -- mainly temporary taxes and intervention in the
partially privatised pension system -- emerged and worried
investors. []
The central bank, in its first comments on the measures,
said the market reaction showed concern about long-term budget
sustainability. The head of the International Monetary Fund's
Hungarian mission, Christoph Rosenberg, said the government's
measures were "bold but risky". [] []
Hungary is coming off IMF aid this year. Hungarian
government bonds weakened after the assessments, while the
forint <EURHUF=> held on to earlier gains and bid up 0.5 percent
on the day at 273.67 to the euro by 1519 GMT.
The forint is off 1.7 percent since hitting a five-month
high at the start of October. Dealers said investors wanted more
fiscal details.
"The market is uncertain, awaiting developments in the
global investment environment, (and) about Hungary's budget and
pension system plans," a Budapest trader said.
"There are so many uncertainty factors that it's no wonder
that the market is cautious."
A Reuters poll showed the market expects rates to remain at
current levels until the end of 2011. []
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. Analysts mostly forecast a first rate
hike this year.
DOLLAR DIRECTION
The falling dollar sent the zloty <EURPLN=> up before it
eased a touch to bid up 0.8 percent at 3.936 per euro. The
region's top performer this year, the Czech crown <EURCZK=>,
gained 0.1 percent, while the leu <EURRON=> rose 0.7 percent.
The leu got an additional boost from Romanian opposition
politicians' comments. The leader of the second largest
opposition party, Crin Antonescu, was quoted in Romania Libera
as saying there was a 55 percent chance Prime Minister Emil
Boc's cabinet would survive this week's no-confidence vote.
"Those who entered long euro/leu ahead of the 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. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.496 24.525 +0.12% +7.44%
Polish zloty <EURPLN=> 3.936 3.969 +0.84% +4.27%
Hungarian forint <EURHUF=> 273.67 275.11 +0.53% -1.21%
Croatian kuna <EURHRK=> 7.341 7.334 -0.1% -0.43%
Romanian leu <EURRON=> 4.269 4.299 +0.7% -0.74%
Serbian dinar <EURRSD=> 106.4 106.36 -0.04% -9.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +12 basis points to 86bps over bmk*
7-yr T-bond CZ7YT=RR +15 basis points to +86bps over bmk*
10-yr T-bond CZ9YT=RR +8 basis points to +105bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +545bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +512bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +456bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1720 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
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Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
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Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Jason Hovet; Editing by Ruth Pitchford, Susan Fenton, John
Stonestreet)
