* FX, stocks rise, German ZEW index supportive
* Investors eyeing Polish wage data
* Bonds stable, Polish mkt waiting for Wed tender
* CDS spreads tighten across central and eastern EU
By Marius Zaharia
BUCHAREST, Aug 18 (Reuters) - Central European currencies
edged up on Tuesday after falling in the previous two sessions,
helped by improved sentiment in the region's main export market,
Germany, with investors eyeing Polish data later in the day.
The ZEW index measuring German analyst and investor
sentiment improved by more than expected to 56.1 in August, from
July's 39.1, its highest level since April 2006 [].
"Regional currencies firmed on ZEW, this is good news," one
dealer said.
At 0929 GMT, the Polish zloty <EURPLN=>, the Hungarian
forint <EURHUF=> and the Czech crown <EURCZK=> were up 0.2-0.3
percent, while the Romanian leu <EURRON=> was flat.
The zloty rose from 4.176 to 4.161 per euro in the first 15
minutes after the release, before pulling back slightly. The
forint also jumped from 273 to 272.4, where it stabilised. The
crown and the leu also firmed, but less than their peers.
Polish wage data due at 1200 GMT may turn out to be key for
the zloty, especially after central bank governor Slawomir
Skrzypek said on Monday the bank was still in easing bias
[].
"If we are right in our call for weak labour market data and
an even larger decline in July industrial activity, we are
likely to see some downward pressure on Polish swap rates in the
coming days as market participants could increase speculation
about further rate cuts," Danske Bank said in a note.
Stocks were also on a stronger footing, gaining 1-1.5
percent across the region.
The positive ZEW data, a recovery in Chinese stock markets,
a news that crisis-stricken Lithuania had been taken off
negative watch by ratings agency Standard & Poors helped risk
perception in the EU's eastern wing to ease.
Five-year CDS -- a rough equivalent to default insurance
against a country's debt -- dropped across the region.
Czech CDS prices fell to 86.8, from 95.6. Hungary's were
down more than 13 points to 253.1 and Poland's dropped almost
nine points to 131.2, according to CMA DataVision. That compared
with a rise in British CDS to 61.6, from 60.2.
CORRECTION STILL POSSIBLE
The zloty has firmed more than seven percent this summer and
the forint has gained almost four percent. Dealers say a
correction for these currencies is still possible in the next
few days.
The crown is seen rather stable in the short run as it is
regarded as a safe heaven within the region, while the leu, the
weakest central European currency compared to the start of the
year, is seen rangebound in illiquid trade.
"The correction could still continue," one Bucharest-based
dealer said. "The zloty and the forint come after ... large
summer gains so a 2-3 percent correction cannot be ruled out."
Over a 12-month horizon, however, currencies are seen
firming, with the zloty outperforming its peers as Poland is set
to avoid recession this year.
Bonds were stable, with investors in Poland eyeing a T-bills
buy-back auction on Wednesday.
Since the beginning of last week, when data showed inflation
was higher than previously expected, 2-year bond yields rose 10
basis points, as the market started to consider more restrictive
monetary policy due to stubbornly high consumer prices.
Trading was thin, especially in Hungary, where markets will
be closed on Thursday and Friday for a national holiday.
Hungary is due to make an interest rate decision on Aug 24.
It cut rates by a bigger-than-expected 100 basis points last
month and has signalled further significant easing for the rest
of the year to help the economy fight deep recession.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.646 25.689 +0.17% +4.32%
Polish zloty <EURPLN=> 4.172 4.181 +0.22% -1.37%
Hungarian forint <EURHUF=> 272.6 273.47 +0.32% -3.32%
Croatian kuna <EURHRK=> 7.3 7.297 -0.04% +0.89%
Romanian leu <EURRON=> 4.216 4.219 +0.07% -4.78%
Serbian dinar <EURRSD=> 93.22 93.24 +0.02% -4.01%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +15 basis points to 71bps over bmk*
4-yr T-bond CZ4YT=RR +6 basis points to +125bps over bmk*
8-yr T-bond CZ8YT=RR 0 basis points to +254bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +365bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +312bps over bmk*
10-yr T-bond PL10YT=RR -12 basis points to +282bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +680bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +611bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +531bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1229 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marius Zaharia,
Editing by Jon Boyle)
