* Zloty, forint come off highs as FX hold steady
* Caution returns as stocks move mixed
* Czechs auction first fixed rate bond since October
(Adds details, fixed income)
By Dagmara Leszkowicz
WARSAW, March 18 (Reuters) - The Polish zloty and Hungarian
forint came off early highs on Wednesday, but central European
currencies held broadly steady against the euro as markets moved
more cautiously after a recent rally.
Better than expected U.S. housing data buoyed global stocks
overnight, with central European bourses opening mixed and
providing some support, while currencies were rangebound.
At 1017 GMT the zloty <EURPLN=> was 0.3 percent up against
the euro to bid at 4.539, while Hungary's forint <EURHUF=> added
0.35 percent to 300.45 per euro.
The Czech crown <EURCZK=> was off 0.3 percent at 26.828, and
the Romanian leu <EURRON=> was steady.
With gains of 3 to 4.5 percent since March 6, currencies
have been on their best run this year, boosted by better global
sentiment due to signs that the banking sector was near a
turning point. But investors booked profits on Tuesday.
"We are trading off equities a little bit," Calyon currency
strategist Stuart Bennett said. "There may be some people still
booking profit. Some caution has resumed... just in case there
is more bad news around the corner."
Markets were set for the end of a U.S. Federal Reserve
meeting later in the day, while attention was also turned
towards the region's own central bank meetings next week.
"I think we can see some stabilisation after the recent
rally," a Prague dealer said. "But we are gaining with the
(falling) dollar and higher stocks still."
The Czech crown has been supported by expectations of stable
interest rates after 200 basis points in cuts since last summer.
Czech central banker Eva Zamrazilova said rates were likely
to remain steady. []
But investors also cautiously eyed the shaky Czech
government coalition after the main opposition party called a
no-confidence vote for next week. []
LOOKING AHEAD
Currencies have lost heavily since hitting record highs last
summer as central Europe's export-driven economies have been
hammered by the global slowdown and worries grow about some
countries' reliance on foreign financing.
Easing monetary policies have also accelerated drops that
have cut up to a quarter of currencies' values. Strategists have
expected further currency weakening in the coming months.
In Poland, analysts said industrial output data due at 1300
GMT may prompt the Monetary Policy Council to cut rates again.
"If the data are not that bad, the Council may consider
leaving interest rates unchanged and that would be supportive
for the zloty," said Lukasz Wojtkowiak at Millennium bank.
Earlier on Wednesday Polish central banker Andrzej Wojtyna
said interest rates should remain unchanged or be cut by only
another 25 basis points as the weak zloty limits scope for more
monetary easing. []
Polish bonds were a tad weaker, while Hungarian papers gave
up recent gains.
The Czech market was muted before the government's first
fixed rate bond auction, due midday, since these sales were
scrapped last autumn when the escalating financial crisis froze
markets. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.828 26.747 -0.3% -0.28%
Polish zloty <EURPLN=> 4.539 4.552 +0.29% -9.34%
Hungarian forint <EURHUF=> 300.45 301.51 +0.35% -12.28%
Croatian kuna <EURHRK=> 7.45 7.441 -0.12% -1.14%
Romanian leu <EURRON=> 4.291 4.288 -0.07% -6.45%
Serbian dinar <EURRSD=> 94.168 94.188 +0.02% -4.98%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -20 basis points to 212bps over bmk*
4-yr T-bond CZ4YT=RR -27 basis points to +243bps over bmk*
8-yr T-bond CZ8YT=RR -20 basis points to +302bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +428bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +372bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +304bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +30 basis points to +1081bps over bmk*
5-yr T-bond HU5YT=RR +14 basis points to +978bps over bmk*
10-yr T-bond HU10YT=RR +13 basis points to +829bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1119 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)
