* Zloty extends rally, hawkish rate comments help
* Other FX mixed, Hungary's election weighs on forint
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, March 5 (Reuters) - Poland's zloty gained for an
eighth straight day on Friday, touching 15-month highs on the
back of hawkish comments on interest rates by central bank
policymakers, while other regional currencies were mixed.
Central Europe's emerging markets have enjoyed a relatively
strong run since the start of the year and have drawn support
from the positive reaction of investors globally to Greek's
latest austerity measures.
The zloty <EURPLN=> is the region's best performer, rising
almost 6 percent against the euro in the last two months.
Dealers attributed the gains both to improved global sentiment
and to comments from Monetary Policy Council (MPC) members.
One new MPC member, Elzbieta Zielinska-Glebocka, said on
Thursday the central bank was likely to raise interest rates in
two small steps in the second half of the year or by the end of
the year. []
"Obviously this statement in itself was a signal for an
imminent rate rise. And in the current environment that also
means new lows in EURPLN," analysts at Commerzbank wrote in a
note.
Central bank Governor Slawomir Skrzypek -- long considered a
supporter of a relatively softer monetary policy -- said this
week the MPC should consider raising rates due to the bank's
recent inflation projection for the next two years.
Others have warned against moving prematurely, however, and
inflation is set to fall well below the bank's 2.5 percent
target later this year, supporting the case for holding fire on
rates to support the economic upturn.
By 1023 GMT the zloty was up 0.5 percent against the euro,
touching 15-month highs at around 3.8805, while Hungary's forint
<EURHUF=> added 0.1 percent and was trading at 266.64
Other currencies hovered around their previous close, with
the Czech crown <EURCZK=> 0.1 percent down and Romania's leu
<EURRON=> almost unchanged against the common currency.
A Reuters poll published on Friday showed the Polish unit
could firm further against the euro over the next year, leading
its peers as economies start recovering. []
By contrast, the forint is expected to weaken slightly in
the next 3 months until after the country's April election when
the new government is expected to clarify whether it wants to
keep fiscal policy tight.
Elsewhere, Romanian dealers said the leu remained stuck in
ranges after central bank Governor Mugur Isarescu said he was
concerned the currency would rise too far. []
"EURRON can't really go further down after that," one
Bucharest-based dealer said."
BONDS RESILIENT
Polish bonds were mixed on Friday, with 5- and 10-year
papers stronger and 2-year bonds weaker after MPC members
signalled possible rate hikes this year.
"(Short-dated) papers are affected by hawkish statements of
the MPC," said Maciej Slomka, chief dealer at Pekao bank in
Warsaw. "I expect the (bond) curve to continue its flattening
further on."
The region's bonds, like currencies, have proved quite
resilient in recent months to worries about heavily indebted
Greece, and analysts said central European countries should not
have problems selling their debt.
Romania sold a lower-than-planned 369 million lei in 5-year
bonds on Thursday, with total bids five times bigger than the
supply. []
A Polish deputy finance minister said on Thursday the
country would sell dollar bonds worth up to $1.5 billion in the
second quarter after it succesfully placed 3 billion euros in
15-year papers in January. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.805 25.793 -0.05% +1.99%
Polish zloty <EURPLN=> 3.881 3.899 +0.46% +5.75%
Hungarian forint <EURHUF=> 266.64 266.78 +0.05% +1.39%
Croatian kuna <EURHRK=> 7.262 7.269 +0.1% +0.65%
Romanian leu <EURRON=> 4.089 4.088 -0.02% +3.63%
Serbian dinar <EURRSD=> 99.727 99.67 -0.06% -3.86%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +9 basis points to 92bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +129bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +97bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +412bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +287bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +529bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +470bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +431bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1023 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Susan Fenton)
