* Hungarian budget deficit rise adds uncertainty
* Romania bill faces parlt again after court greenlight
(Updates throughout)
By Gergely Szakacs and Jason Hovet
BUDAPEST/PRAGUE, Oct 8 (Reuters) - The forint hit a one-week
low on Friday, largely due to a correction after recent gains but
also reflecting nervousness over Hungary's ability to rein in
its budget deficit, dealers said.
Other emerging European currencies were mixed, with a rise
in the Romanian leu capped by new questions over a
government-sponsored reform bill vital to the country meeting
IMF-aid conditions.
The two currencies have struggled to gain ground this year
despite an uptick in investor flows in recent months, and
analysts expect them to continue to lag peers like the Polish
zloty and Czech crown in the months ahead. []
At 1442 GMT, the forint <EURHUF=> was 0.55 percent weaker
versus the euro, while the Polish zloty <EURPLN=> was down 0.1
percent. The Czech crown <EURCZK=> and the Romanian leu
<EURRON=> were both up 0.1 percent.
Hungary's budget deficit grew in September to 125 percent of
the full-year target, data showed on Thursday, and analysts said
a very tight fiscal policy was needed to meet the year-end
target. []
One dealer said the size of the deficit was adding an
element of uncertainty to the market, though the forint's recent
retreat against the euro was mainly driven by technical factors
after a more than 5 percent gain in the last month.
"It was a bit overdone at the 269 levels, so there was a
(negative) correction and global sentiment has also turned a bit
for the worse," a Budapest-based currency dealer said.
"There is some uncertainty in the market regarding the
deficit, because this 125 percent (of the full-year target) is a
lot, but this is just a very minor uncertainty."
The centre-right government has pledged to meet this year's
budget deficit target of 3.8 percent of gross domestic product,
before cutting it to below 3 percent next year.
TOUGH AUTUMN FOR ROMANIA
Romania's government, which has had trouble selling debt at
its desired yield level below 7 percent, is facing a tough
autumn with the need to again push through IMF-mandated reform
while fending off an expected no-confidence vote.
President Traian Basescu sent an IMF-backed pension reform
bill -- which got the greenlight from Romania's top court this
week -- back to parliament on Thursday, asking legislators to
reconsider plans to raise the retirement age for women.
[]
"The minority government might struggle to pass the pension
reform bill again, leaving the IMF programme at the risk of
derailment. More weakening pressure on (the leu) should be
expected in such a case," ING Bank said in a note.
Polish bonds traded little changed on Friday. Poland's
deficit stood at 39.5 billion zlotys at the end of September,
better than the original budget schedule, as spending was
slower than planned. []
Still, fiscal policy continued to worry investors. "The
recent sudden selloff of state-owned assets, even though it
didn't affect the zloty so far, is definitely not supportive for
the unit," said Jakub Wiraszka, dealer at BRE bank.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.477 24.501 +0.1% +7.52%
Polish zloty <EURPLN=> 3.979 3.976 -0.08% +3.14%
Hungarian forint <EURHUF=> 275.52 274.00 -0.55% -1.88%
Croatian kuna <EURHRK=> 7.296 7.315 +0.26% +0.18%
Romanian leu <EURRON=> 4.268 4.27 +0.05% -0.72%
Serbian dinar <EURRSD=> 105.8 105.85 +0.05% -9.38%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 96bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +97bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +109bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +318bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1643 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Gergely Szakacs and
Jason Hovet; Editing by Tim Pearce and Susan Fenton)
