* Forint, zloty ease, crown and leu largely flat
* Stocks rebound from early falls
* Markets eye Fed, Hungary cbank minutes
(Updates prices, adds Polish bond auction)
BUDAPEST, Aug 12 (Reuters) - The Polish zloty steadied near
a two-week low on Wednesday, with central European peers on a
weaker footing as investors pulled back more from the region's
rally before the end of the U.S. Federal Reserve's meeting.
The zloty may have been helped by a recommendation from
Erste Group to buy that currency against the euro or forint due
to better Polish economic fundamentals and the fact that it had
the most to make up in losses. []
The zloty <EURPLN=> bid a touch up at 4.178 per euro, after
falling sharply in the previous session as investors booked
profits in the run up to the U.S. central bank's meeting, with
eyes mostly on its economy statements afterward.
"If we see a more stimulative environment, then growth
prospects in central Europe will be better... But mainly it is
more of a psychological effect," said a central European
currency dealer at a Stockholm-based bank.
After falls in early morning trade against the euro, the
region's other currencies also regained some ground by 1048 GMT,
with the Hungarian forint <EURHUF=> 0.2 percent weaker.
The Romanian leu <EURRON=> and the Czech crown <EURCZK=>
were also little changed, while the region's stock markets
rebounded from early falls.
Central Europe's assets have gained in the summer months as
signs the global economy is on the mend prompted buying in
riskier assets, and the region's export-driven economies have
started showing their first signs of reaching a bottom.
The zloty, which traded down as much as 40 percent from a
2008 high in Februray, has led currency gains with a 7 percent
rise since June.
WAITING ON THE FED
Analysts note central Europe's recent rise remains fragile
and dependent on global sentiment.
"Risk factors for our trading idea are primarily of a global
nature. Should the recovery be too slow and painful, possibly
connected with yet another strike of the crisis... and
consequent worsening of the market sentiment, we might yet see
another wave of weakening of the zloty," Erste said in its trade
idea.
Goldman Sachs recommended to close short protection
positions in 5-year Hungarian credit default swaps as the
spreads had fallen sharply in the past weeks, and risk sentiment
may be the most important driver of moves.[]
David Sykora, an FX dealer at Ceskoslovenska Obchodni Banka,
said the region should strengthen if the Fed indicates the U.S.
economy has rebounded and will soon start showing signs of a
recovery, as investors should take that as a signal they can
enter riskier assets including emerging markets currencies.
The retreat of the region's currencies from the past few
months' strong gains also pulled government bond prices lower.
Yields in Polish bonds inched up as the zloty continued to
cede recent gains due to rising risk aversion. Traders also said
bond prices might have dipped as investors await a slew of
additional supply of Polish papers.
Poland sold 3.5 billion zlotys worth of five-year bonds at a
tender on Wednesday.[].
Early selling pushed Hungarian bond yields up, but the
pressure subsided later, and traders said the government could
easily sell bonds at its auctions on Thursday <HUISSUE>.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.78 25.788 +0.03% +3.77%
Polish zloty <EURPLN=> 4.178 4.185 +0.17% -1.51%
Hungarian forint <EURHUF=> 273.45 273.00 -0.16% -3.62%
Croatian kuna <EURHRK=> 7.32 7.322 +0.03% +0.61%
Romanian leu <EURRON=> 4.22 4.217 -0.07% -4.87%
Serbian dinar <EURRSD=> 93.426 93.556 +0.14% -4.22%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 56bps over bmk*
4-yr T-bond CZ4YT=RR +6 basis points to +118bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +251bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +346bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +296bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +266bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -21 basis points to +677bps over bmk*
5-yr T-bond HU5YT=RR -56 basis points to +610bps over bmk*
10-yr T-bond HU10YT=RR -46 basis points to +522bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1436 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marton Dunai/Sandor Peto; Editing by Stephen
Nisbet)
