(Adds details, fixed income, byline)
By Jason Hovet
PRAGUE, Dec 5 (Reuters) - Emerging European currencies
slipped on Friday along with stocks in the region as Poland's
zloty extended losses on corporate worries while Serbia's dinar
continued a march back from record lows.
The dinar, the hardest hit of the region's economies in the
recent flight out of emerging markets, fell as much as 22
percent since August on external funding worries, but added 2.6
percent on Friday to bid at 85.83 per euro <EURRSD=>.
The battered currency rallied 5 percent on Thursday when the
Serb central bank announced plans to raise the dinar reserve
requirement for banks and resume fixing sessions [],
but the turmoil has unnerved some dealers.
"The difference between the bidding and asking rate has
increased from 0.50 dinars to 0.80 to 1.00," one dealer said.
"Even higher instability has been created, only in the opposite
direction."
In Poland, the zloty <EURPLN=> stuck to weak levels, down
0.8 percent at 3.88 per euro by 1010 GMT and extending losses
seen in the last week. Investors have been unnerved by news
corporates stand to lose billions of euros on FX contracts made
before the zloty fell sharply in October [].
Hungary's forint <EURHUF=> lost 0.4 percent from Thursday's
close to 261.7 per euro and the Czech crown <EURCZK=> 0.2
percent at 25.66 after a spike lower to near 26 overnight, but
trading was quiet ahead of U.S. employment data due out later.
TRADE AT OWN RISK
Central Europe's currencies have mostly settled into steady
ranges in recent weeks after sharp losses in October and
November as investors shy away from new positions, but lower
liquidity causes temporary spikes, dealers and analysts said.
The forint has edged up 1.2 percent in the past two weeks
and the crown is a shade higher, while the zloty and Romania's
leu lost 0.5 percent.
"Currencies had already weakened quite a bit," said Ulrich
Leuchtmann, head of foreign exchange research at Commerzbank in
Frankfurt. "There also hasn't been much (surprising) news, and
global factors are staying where markets expect."
Expectations are growing that central banks in the Czech
Republic, Poland and Hungary will cut interest rates again this
year after large cuts from European central banks this week.
On Friday, data showed Hungarian industrial output fell an
annual 7.2 percent in October [], more evidence that
a slowdown in export markets in the euro zone was hurting.
Hungarian bond yields dropped around 60 basis points on
Thursday mostly on strengthening rate cut expectations.
"I would say the rally continues," a trader said. "Everybody
is cutting rates and some players also expect the Hungarian
central bank to cut rates by 100 basis points this month."
The bank hiked rates in an emergency move by 300 bps in
October, but unexpectedly trimmed 50 basis points in November to
put the main rate at 11 percent.
In Romania, trading was thin as talks progressed for a new
government after a parliamentary election last Sunday, and the
leu <EURRON=> dipped to 3.85 against the euro, 0.2 percent down.
"The leu is still disconnected from the region, only locals
are trading," one dealer said. "Foreigners have been absent for
the past week because of political uncertainty."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.655 25.617 -0.15% +3.18%
Polish zloty <EURPLN=> 3.881 3.849 -0.83% -7.79%
Hungarian forint <EURHUF=> 261.72 260.61 -0.43% -3.51%
Croatian kuna <EURHRK=> 7.177 7.162 -0.21% +2.04%
Romanian leu <EURRON=> 3.848 3.839 -0.23% -7.48%
Serbian dinar <EURRSD=> 85.831 88.108 +2.58% -8.98%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -1 basis points to 151bps over bmk*
5-yr T-bond CZ5YT=RR -2 basis points to +184bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +124bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +346bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +306bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +275bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -61 basis points to +780bps over bmk*
5-yr T-bond HU5YT=RR -62 basis points to +749bps over bmk*
10-yr T-bond HU10YT=RR -56 basis points to +555bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1114 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham/Victoria Main)
