(Updates throughout)
By Marius Zaharia and Dagmara Leszkowicz
WARSAW/BUCHAREST, Jan 28 (Reuters) - Central European
currencies firmed on Wednesday, helped by rising global equities
and easing risk aversion as investors were hopeful of fresh
steps from U.S rate-setters.
The Federal Reserve is to conclude a two-day meeting later
in the day and may decide on ways to stimulate the world's
largest economy and by connection, the shrinking euro zone, an
important propeller for central Europe's export-driven
economies.
"Everybody is eyeing the U.S. moves, some investors
anticipate the decision will be perceived positively by markets,
which has in part a fade-out effect for risk aversion," one
Bucharest-based dealer said.
At 1504 GMT, the Czech crown <EURCZK=> was 1.2 percent
firmer from Tuesday, the Hungarian forint <EURHUF=> was 0.1
percent up, Romania's leu <EURRON=> was flat, while the Polish
zloty <EURPLN=> added 0.2 percent.
In Serbia, where the central bank intervened twice in the
market on Wednesday [], the dinar <EURRSD=> led
gains in the region, rising 1.8 percent.
Dealers said dollar weakening also helped the region. The
euro is the reference currency for the region and dealers often
take cues from the euro/dollar.
"The crown is befitting from the (stronger) euro/dollar,"
said one Prague trader. "But nobody want to be exposed to risk
too long, which is making the market more choppy."
Regional currencies have been hit by a fast deterioration of
local growth forecasts as the global credit crunch deepens and
central banks respond with a series of interest rate cuts.
Poland has chopped a more than expected 75 basis points off
its key rate on Tuesday to defend growth and policy makers
appeared split on the scope for further rate cuts [].
Zloty's weakness, which Polish president Lech Kaczynski
labeled as excessive [], may be one of the key
factors in the debate.
Czech Republic and Romania -- which so far has avoided the
monetary easing trend -- are expected to cut interest rates as
well next week.
Hungary has reversed two thirds of October's 300 basis point
emergency rate hike and analysts see room for more cuts as the
economy sinks into recession.
A draft of the Hungarian government's economic assumptions
saw the economy shrinking by 2.5-3 percent this year, compared
to an earlier forecast of a 1 percent decline. []
Hungary has followed Poland's example and launched a
euro-Swiss franc swap agreement with the Swiss National Bank to
address the shortage of francs, popular for mortgages in both
countries. []
In bond markets, yields on Hungarian bonds rose slightly in
low turnover.
"There was some selling, but turnover is not too high. The
sentiment is not very good in the bond market, the turnover is
low and small amounts can move prices," one trader said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.44 27.758 +1.16% -2.5%
Polish zloty <EURPLN=> 4.38 4.387 +0.16% -6.05%
Hungarian forint <EURHUF=> 286 286.4 +0.14% -7.85%
Croatian kuna <EURHRK=> 7.364 7.363 -0.01% +0.01%
Romanian leu <EURRON=> 4.23 4.23 0% -5.1%
Serbian dinar <EURRSD=> 94.818 96.525 +1.8% -5.63%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +12 basis points to 106bps over bmk*
4-yr T-bond CZ4YT=RR +13 basis points to +108bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +136bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +21 basis points to +776bps over bmk*
5-yr T-bond HU5YT=RR +15 basis points to +723bps over bmk*
10-yr T-bond HU10YT=RR +26 basis points to +565bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1704 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
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(Reporting by Reuters bureaux, Writing by Dagmara Leszkowicz
and Marius Zaharia; Editing by Toby Chopra)
