(Recasts with Czech rate decision, latest prices)
* Czech c.bank surprises, holds rates; crown eases
* Polish c.bankers see little scope for further cuts
* Polish retail sales slightly stronger than expected
* Forint firms though Hungary retail sales fall further
By Sandor Peto
BUDAPEST, June 25 (Reuters) - The crown <EURCZK=> weakened
slightly on Thursday after the Czech central bank surprised
markets by holding interest rates flat, but analysts said rate
cuts might well resume in coming months. []
Central European currencies in general lost momentum as
stock markets fell. But both the forint <EURHUF=> and the stock
market of Hungary, where interest rates were kept on hold on
Monday, extended gains.
Poland's zloty <EURPLN=> steadied amid hopes that
Wednesday's cut in rates may have brought the central bank near
the end of its easing cycle.
The Czech crown, a traditional safe haven trade within the
region due to relatively strong fundamentals despite low yields,
slipped to a low of 26.137 against the euro despite the interest
rate decision from around 26.060 beforehand.
Analysts said the surprise central bank decision to hold
rates instead of cut them may have been caused by the temporary
absence from the policy panel of two rate setters who had
previously voted for a cut.
"Low inflation, a relatively strong crown and deepening
recession remain as reasons for further easing of monetary
conditions," said David Marek, chief economist of Patria
Finance.
But two hours after the rate decision, the Czech crown had
regained almost all its losses to stand at 26.070.
FORINT
Meanwhile Hungary's forint firmed after a central bank
decision on Monday to keep interest rates at the highest levels
in the European Union, at 9.5 percent.
Wednesday's huge liquidity infusion into euro zone markets,
through a money market operation by the European Central Bank,
helped to increase the attractiveness of the forint against the
euro as short-term euro zone money market rates slid.
Hungarian bond prices rose in line with the currency, which
was not hurt by news of a sharp drop in Hungarian retail sales,
which slid a calendar-adjusted 4.1 percent in April after a 3.6
percent drop in March. []
"The stronger forint pushes bonds, as does the tightness of
supply," a fixed income dealer in Budapest said.
"There are not even enough new issues to make up for
expiries. The (government debt agency) AKK should increase the
size of auctions soon."
ZLOTY
The zloty was flat after Polish rate setters, speaking in
the wake of Wednesday's 25 basis point cut, said there was not
much room for more monetary easing in Poland.
"The room for more interest rate cuts is minimal," Halina
Wasilewska-Trenkner, who has opposed some of the higher rates,
told radio PiN. "I personally see no need to cut rates again
until the end of the year." [] []
Polish retail sales for May came in slightly above forecast,
growing 1.1 percent from a year earlier, while the number of
jobless inched down. []
In addition to the Czech central bank, Serbia's central bank
held its key policy rate steady on Thursday because of worries
about inflation and the country's budget deficit. []
---------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.103 26.023 -0.31% +2.49%
Polish zloty <EURPLN=> 4.512 4.514 +0.04% -8.8%
Hungarian forint <EURHUF=> 276.92 277.52 +0.22% -4.83%
Croatian kuna <EURHRK=> 7.309 7.304 -0.07% +0.77%
Romanian leu <EURRON=> 4.217 4.221 +0.09% -4.8%
Serbian dinar <EURRSD=> 94.156 93.74 -0.44% -4.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +17 basis points to +158bps over bmk*
4-yr T-bond CZ4YT=RR -2 basis points to +178bps over bmk*
8-yr T-bond CZ8YT=RR +13 basis points to +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -20 basis points to +824bps over bmk*
5-yr T-bond HU5YT=RR -55 basis points to +759bps over bmk*
10-yr T-bond HU10YT=RR -47 basis points to +666bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1214 CET.
Currency percent change calculated from the daily domestic close at 1600 GMT.
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(Reporting by Reuters bureaus; Writing by Gergely Szakacs and
Sandor Peto; Editing by Patrick Graham and Andrew Torchia)
