BUDAPEST, Aug 4 (Reuters) - East Europe's currencies were
mixed on Tuesday with the Polish zloty gaining a little versus
the forint, which eased slightly, dealers said.
The Romanian central bank holds a rate setting meeting later
in the day at which it is expected to cut its key interest rate
by 50 basis points to 8.5 percent.[]
Hungary cut its key interest rates by 100 basis points to
8.5 percent last week and players are now buying zlotys and
selling forints as the interest rate spread has narrowed, while
the Polish economy is in a better shape than Hungary's.
"The favourite trade is PLNHUF long again ... volumes are
thin, and sentiment continues to be strong," a Budapest-based
currency dealer said.
"Technically, if the PLNHUF goes above 65.20 then the forint
will move to a range between 268-269 versus the euro."
The forint was trading around 266 to the euro at 0720 GMT.
Unicredit recommended long PLN/HUF trade in a note to
clients on Monday.
"Recent sentiment indicators ...suggest that countries with
more stable fundamental backdrop, together with looser monetary
and fiscal conditions (including Poland) are recovering faster
than countries with bigger financial stability worries
(including Hungary)," Unicredit analyst Gyula Toth said.
After gaining about 1.5 percent against the euro on Monday,
analysts said the Polish zloty could continue appreciating as
global sentiment remains positive towards riskier assets.
"The engine of zloty gains is optimism on the global
financial markets and high risk appetite," BPH Bank analysts
wrote in a morning note to clients.
"If this positive sentiment persists and Asian bourses
sessions seem to suggest this, then one may expect zloty to
continue gaining," they said.
Hungary's forint <EURHUF=> was down 0.34 percent, while
Poland's zloty <EURPLN=> was up 0.22 percent against the euro at
0700 GMT. The Czech crown <EURCZK=> and the Romanian leu
<EURRON=> were basically flat.
On Monday, the zloty was also supported by better than
expected Purchasing Managers Index (PMI) which showed a record
gain and by the finance ministry's forecast which showed
inflation could remain at 3.5 percent in July -- well above the
central bank's target.
Analysts said this could mean the main interest rate,
currently at an all-time low of 3.5 percent, could stay on hold
until the incumbent Monetary Policy Council (MPC) gives way to
their successors early in 2010.
The Czech crown <EURCZK=> was steady after underperforming
peers to start the week, and dealers said there was limited room
for firming before a central bank meeting later this week.
A thin majority of analysts, 11 out of 20, expected the
Czech central bank to leave rates unchanged on Thursday in a
Reuters poll last week while 9 analysts forecast a cut
[].
"The region is still strong but the crown looks like a hedge
against the short euro/zloty and forint," one dealer said.
"Ahead of the central bank meeting, it's probably tough to see
some strengthening."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.678 25.66 -0.07% +4.19%
Polish zloty <EURPLN=> 4.092 4.101 +0.22% +0.56%
Hungarian forint <EURHUF=> 265.5 264.6 -0.34% -0.73%
Croatian kuna <EURHRK=> 7.336 7.336 0% +0.4%
Romanian leu <EURRON=> 4.196 4.199 +0.07% -4.33%
Serbian dinar <EURRSD=> 92.917 93.047 +0.14% -3.7%
All data taken from Reuters at 0859 CET.
Currency percent change calculated from the daily domestic
close at 1645 CET.
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(Reporting by Krisztina Than, editing by Mike Peacock)
