* Zloty lower as some see milder monetary tightening
* Hungary's fiscal reform, monetary policy changes eyed
* Bonds idle ahead of data heavy week regionwide
By Marton Dunai
(Releads, adds bonds, comments, updates prices)
BUDAPEST, Feb 14 (Reuters) - The Polish zloty underperformed
emerging European currencies on Monday as some analysts said
rate hike expectations may have been overplayed, while investors
eyed upcoming data and Hungary's fiscal reform plans.
The zloty <EURPLN=> shed 0.5 percent by 1056 GMT, followed
by a 0.3 percent slide in the Hungarian forint <EURHUF=>. The
Czech crown <EURCZK=> was flat, while the Romanian leu <EURRON=>
gained 0.1 percent.
Analysts expect multiple rate hikes in Poland this year but
some have concluded those expectations have been overdone.
"We continue to believe that too much monetary tightening is
now discounted and see this as the key risk for PLN, given its
high sensitivity to short term interest rates," RBC said in a
note to clients.
Inflation and growth data are seen instrumental to gauge a
likely rate path in Poland. In one near-term signal, a fresh
Reuters poll had Poland's January inflation accelerating to 3.4
percent. []
The forint was seen as sensitive to political and fiscal
news, especially about the government's reform package and its
planned changes to the rules for nominating central bank
rate-setters, the majority of whom will be replaced in March.
Hungarian Prime Minister Viktor Orban will outline later on
Monday some measures of a fiscal reform programme designed to
put the country's budget on a sustainable path by the time
temporary measures to boost revenues expire in 2013.
"In case he comes out with a strong programme, the forint
could strengthen further," a Budapest-based dealer said. "The
next strong resistance is at the (EUR/HUF) 268 level."
Orban is due to speak at around 1200 GMT.
Hungary's ruling Fidesz party politicians have said the
impending changes to the central bank's Monetary Council, and
new rules that could let Fidesz pack the council with its
candidates, will not lead to a sudden policy reversal.
[]
The central bank remains adamant in its rejection of the new
rules, and markets are watching nervously for any signs that the
changes might lead to softer policy. []
"The market is misjudging the outlook for policy rates after
the MPC is changed, as no risk of a rate cut is priced (in),"
RBC said in its note.
DATA-HEAVY WEEK AHEAD
This week sees a heavy schedule of data releases in the
region. Poland and Hungary release January inflation figures on
Tuesday, and Hungary, the Czech Republic and Romania also give
fourth-quarter GDP estimates.
Romania kicked off the series of releases, recording a 7
percent annual inflation for January, down from 8 percent in
December. Analysts said the data should have no immediate impact
on interest rates or short-term exchange rates. []
Inflation in Romania is widely expected to fall sharply this
year and analysts see the central bank cutting rates further
from a record low 6.25 percent, although pressures from surging
global food prices could limit the room for rate cuts.
The Czech crown was seen steady ahead of Tuesday's GDP data.
"The crown is not likely to react to good data, but in the
case of weaker data it could be a stimulus for a correction back
to its fundamentals above 24.500," Ceska Sporitelna analyst Jana
Krajcova said in a note.
Bond markets were calm, with yields broadly in line with
Friday's levels and eyes firmly on Hungary's fiscal plans,
dealers said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.219 24.21 -0.04% +3.22%
Polish zloty <EURPLN=> 3.937 3.917 -0.51% +0.53%
Hungarian forint <EURHUF=> 272.03 271.2 -0.31% +2.19%
Croatian kuna <EURHRK=> 7.407 7.409 +0.03% -0.36%
Romanian leu <EURRON=> 4.248 4.254 +0.14% -0.35%
Serbian dinar <EURRSD=> 103.25 103.38 +0.13% +2.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +10 basis points to -5bps over bmk*
7-yr T-bond CZ7YT=RR +20 basis points to +79bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +64bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +335bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +526bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +481bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +422bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1156 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 emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaux, writing by Marton Dunai; Editing
by Catherine Evans)
