* Poland leaves key rate on hold at 3.75 pct, zloty falls
* Forint recoups some losses as markets digest fiscal plan
* Czech markets price rate hike for middle of year
(Updates after Polish, U.S. data)
By Marton Dunai and Jason Hovet
BUDAPEST/PRAGUE, March 2 (Reuters) - Poland's zloty weakened
on Wednesday after the central bank left interest rates on hold,
surprising many investors who had bet on a rise, while Hungary's
forint recouped losses as markets further digested reform plans.
Poland's central bank left its main interest rate flat at
3.75 percent on Wednesday, as forecast by a narrow majority of
analysts in a Reuters poll. The bank will explain its decision
at a 1500 GMT press conference.[]
The zloty <EURPLN=> fell up to half a percent after the
decision and was bid flat on the day at 3.97 to the euro by 1433
GMT, underperforming the rest of the region.
The Hungarian forint <EURHUF=>, after a drop on Tuesday when
the government announced reform plans that were lacking some of
the detail the market had counted on, gained 0.6 percent.
The Czech crown <EURCZK=> was up 0.2 percent and the
Romanian leu <EURRON=> was steady.
Some analysts said expectations for a Polish rate hike at
the next meeting would increase after Wednesday's decision.
Data showed earlier in the day that Polish economic growth
picked up to 4.4 percent in the fourth quarter as forecast,
helped by strong domestic demand. []
But that data, along with news the country's public debt
stood at 53.5 percent of GDP at the end of 2010 -- avoiding
levels that would trigger automatic spending cuts -- did little
to boost the zloty.
Markets are still pricing in a series of rate hikes in
Poland and analysts said the bank would likely be more hawkish
in its post-decision press conference and statement.
"The medium-term consequences of unchanged rates are clearly
negative with higher PLN sensitivity to external risks and
further PLN underperformance vs CEE FX," said Rafal Benecki,
senior economist with ING Bank in Warsaw.
"The MPC may try to limit these negative PLN implications
with some hawkish accents in the statement.
STAGGERING POLICY
Emerging European currencies found support from a euro
firming versus the dollar, a cross the region typically tracks.
The euro reached a November high on growing expectations that
euro zone interest rates would rise faster than U.S. rates.
[]
The Poles raised rates in January for the first time since
the 2008 financial crisis, while the Hungarians have carried out
three quarter-point increases since November but paused at the
last meeting.
While the Czech central bank has yet to move on record low
interest rates, forward rate agreements (FRA) are pricing in a
hike by the middle of the year.
Central bank chief Miroslav Singer has said inflationary
pressures in the Czech economy are still weak. []
<CZKFRA> <>
Investors in Hungary continued to digest government fiscal
plans announced the previous day, which were seen as lacking the
kind of detail the market had counted on. []
Hungarian assets have rallied this year on bets that a plan
to save billions and set finances on a sustainable path would
keep the country's debt rating from falling to junk status.
"We can't really sell a bull story to investors as this
package is not muscular enough for that," one dealer said. "But
there's no bear story either as nobody in their right mind
expects a (Hungary) rating downgrade to junk."
Budapest bonds were flat. Stocks <> fell 0.6 percent,
dragged lower by blue chip OTP Bank's <OTPB.BU> 1.6 percent fall
on government plans for an extension of a windfall bank tax
after 2011.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.267 24.321 +0.22% +3.02%
Polish zloty <EURPLN=> 3.974 3.974 0% -0.4%
Hungarian forint <EURHUF=> 270.88 272.4 +0.56% +2.62%
Croatian kuna <EURHRK=> 7.411 7.419 +0.11% -0.42%
Romanian leu <EURRON=> 4.201 4.203 +0.05% +0.76%
Serbian dinar <EURRSD=> 104.16 103.4 -0.73% +1.7%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 15bps over bmk*
7-yr T-bond CZ7YT=RR -9 basis points to +75bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +80bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1535 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Krisztina Than/Marton Dunai; Editing by Catherine
Evans)
