* Forint leads mild gains, auctions eyed
* Leu gives back some ground after c.bank comments
* Crown off from highs
By Jason Hovet
PRAGUE, Aug 6 (Reuters) - Romania's leu gave up some of its
early gains on Friday after the central bank governor said he
"discouraged" more gains and warned the government it must
accept higher costs of borrowing than a 7 percent cutoff.
The Hungarian forint led cautious gains elsewhere in central
Europe with markets awaiting important U.S. payroll data later
in the day. The Czech crown fell after a central bank meeting on
Thursday.
Romanian central bank Governor Mugur Isarescu highlighted a
range of risks to an economy still struggling to recover from
crisis with the help of an IMF bailout, also pointing to
inflation risks arising from difficulties on fiscal policy.
The governor said the government should consider meeting
market yield demands in bond auctions, following a period of
scaling down issuance when it saw little demand below a
self-imposed cap of 7 percent.
Markets had been unfazed by Romania's finance ministry
refusing again to pay yields above 7 percent at a sale of 3-year
treasury bonds on Thursday, rejecting all bids for the fourth
consecutive time. []
But analysts and dealers say pressure will slowly grow on
Bucharest to accept higher borrowing costs -- in turn putting
more pressure on the budget.
The Czech crown <EURCZK=> dipped half a percent but was
still near 21-month highs at 24.7 per euro a day after a central
bank rate meeting held interest rates steady and delivered
milder comments than market players had expected given the rapid
appreciation of the crown this summer.
Governor Miroslav Singer said it was "no big drama" if the
crown, whose strength has helped curb inflation, stayed around
where it is now. But he added further appreciation at this pace
could change the inflation outlook and the bank may have to
react. []
The crown has been a top performer among central European
currencies this year, and has gained 4 percent since July thanks
to better risk appetite globally, improving economic data and
strong pledges by a new government to cut the budget.
Dealers said the central bank comments opened space for more
firming, and that resistance to weakening was found around the
24.800 level, where euro selling orders were placed.
"A break stronger is a question of days," the Prague dealer
said. "We cold get to 24.500 (per euro) but that would be a
level with strong buy (euro) interest."
TRADE
Investors took local data elsewhere in their stride, with
Hungary posting a stronger-than-expected trade surplus for June
on the back of a 23.2 percent annual rise in exports.
[] Higher imports in the Czech Republic caused a
lower June trade surplus, but analysts said export growth was
still strong. []
Central Europe is highly dependent on trade to the richer
euro zone, but on Friday investors were focussed on whether weak
U.S. jobless claims figures released earlier this week meant the
payroll data would heighten worries about the world's largest
economy.
"It is quiet right now, and there was no surprise in Czech
figures today," a Prague dealer said. "The U.S. data is still a
big question in the market."
The forint <EURHUF=> rose 0.3 percent versus the euro along
with the leu <EURRON=>. The Polish zloty <EURPLN=> edged up a
touch to 3.983 per euro.
The Hungarian bond market was very illiquid with yields
little changed. Deals were few and far between, one dealer said.
"Next week will be interesting," he said. "There will be a
bond auction on Thursday with extra supply in a switch auction
on the 15-year bonds (on Wednesday), so especially the long end
will see some supply side pressure. Auctions have been sold in
recent weeks, but one remains cautious as that success might be
fleeting."
Hungary will sell 50 billion worth of 3-, 5- and 10-year
bonds on Thursday. <HUISSUE> The switch auction will target a
maximum of 14 billion forints worth of short-end bonds to be
exchanged for 2023 maturity papers. <HUEXCHANGE>
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.739 24.626 -0.46% +6.38%
Polish zloty <EURPLN=> 3.983 3.985 +0.05% +3.04%
Hungarian forint <EURHUF=> 279.1 280.97 +0.67% -3.14%
Croatian kuna <EURHRK=> 7.223 7.221 -0.03% +1.19%
Romanian leu <EURRON=> 4.243 4.251 +0.19% -0.13%
Serbian dinar <EURRSD=> 105.88 105.96 +0.08% -9.44%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -20 basis points to 98bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +109bps over bmk*
10-yr T-bond CZ9YT=RR -7 basis points to +111bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +392bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +382bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +327bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -15 basis points to +589bps over bmk*
5-yr T-bond HU5YT=RR -8 basis points to +554bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +463bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1157 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 Ruth Pitchford)
