* Gains on global recovery hope as G20 meets
* Forint helped by drastic spending cut plan
* ECB decision mixed for region
(Recasts with fresh comments, prices)
By Sandor Peto
BUCHAREST/WARSAW/BUDAPEST, April 2 (Reuters) - Currencies in
Central Europe surged on Thursday as the hope of global recovery
lifted risky assets in the world and Hungary's prime minister
designate announced a programme of deep spending cuts.
World leaders agreed at the G20 meeting in London a
trillion-dollar deal to fight the global economic crisis,
lifting equity markets, though economists warned against
euphoria. []
The dollar's fall against the euro after the European
Central Bank's rate cut was positive for currencies in Central
Europe's emerging markets, but it was less favourable that the
cut was smaller than expected, dealers said.[]
An expected recovery of the world economy would boost the
markets of Central European states which are heavily reliant on
exports and foreign financing and suffered steep currency falls
due to the global crisis, dealers and analysts said.
"The market is very sensitive to positive news and they have
started to price in that the bottom of the recession may be
near," said Gyorgy Barcza, analyst at K&H Bank.
Others, including one Budapest-based currency dealer, were
less optimistic.
"The market had been long (in euros) and positions are cut
in the region," the dealer said. "A trend change in the world
cannot be ruled out but I don't think that all of a sudden
everything is all right. We firm tomorrow, fall on Monday."
The Hungarian forint <EURHUF=D2> led the gains in the
region, firming 3.7 percent against the euro to 293 by 1523 GMT.
It got additional boost from news about the plans of prime
minister designate Gordon Bajnai for big spending cuts to reduce
reliance on foreign financing in Hungary, which prevented
meltdown last year only by securing a big IMF-led aid.
Romania also secured IMF aid last month, but the leu
<EURRON=> firmed by only 0.6 percent after central bank figures
showed 796 million euro fall in the foreign currency reserves in
March. []
"The Romanian leu cannot keep up with the firming pace of
its peers as up until the IMF deal it had been kept stronger
artificially through central bank covert interventions (from the
reserves)," one dealer with a foreign bank in Bucharest said.
The Polish zloty <EURPLN=> gained 3.7 percent per euro to
4.401 and the Czech crown <EURCZK=> firmed 2.55 percent to
26.49.
Stocks in the region also continued to climb, with Prague's
PX <> and Warsaw WIG20 <> gaining more than 6 percent.
Dealers said the stocks' rally gave the currencies extra fuel.
Government bonds also firmed following well-bid auctions in the
Czech Republic and Poland earlier this week.
"There has been a strong correlation to overseas markets of
late, and the opening in the U.S. suggests the rally might
continue tomorrow," one Budapest-based fixed income trader said.
Risks were clearly indicated when credit rating agency
Moody's issued ratings downgrades on two of Austria's biggest
banks exposed to emerging Europe on Wednesday, following up on a
warning that rattled emerging European markets in February.
Moreover, the Czech and Hungarian governments fell and
Budapest suffered downgrades by S&P and Moody's this week,
adding weakening pressure on regional assets.
"The question is whether the pick-up in risk is likely to
be sustainable," said Roderick Ngotho, strategist at UBS. "In my
view the balance of risks for sentiment leans to the downside
over the next weeks."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.49 27.165 +2.55% +0.99%
Polish zloty <EURPLN=> 4.401 4.563 +3.68% -6.5%
Hungarian forint <EURHUF=> 293 303.9 +3.72% -10.05%
Croatian kuna <EURHRK=> 7.455 7.455 0% -1.21%
Romanian leu <EURRON=> 4.197 4.224 +0.64% -4.35%
Serbian dinar <EURRSD=> 94.277 94.682 +0.43% -5.09%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +13 basis points to 218bps over bmk*
4-yr T-bond CZ4YT=RR -41 basis points to +243bps over bmk*
8-yr T-bond CZ8YT=RR -22 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -44 basis points to +1017bps over bmk*
5-yr T-bond HU5YT=RR -80 basis points to +947bps over bmk*
10-yr T-bond HU10YT=RR -66 basis points to +823bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1723 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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emerging market news []
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(Reporting by Reuters bureaus, Writing by Marius Zaharia,
Dagmara Leszkowicz and Sandor Peto, Editing by Victoria Main and
Andy Bruce)
