* CEE FX hold overnight gains after fast drop in dollar
* Stocks continue rally, lending FX support
* Hungarian bonds stronger, Czech papers weaken
* Hungary cbank expected to hold rates next Monday
(Adds Hungary bonds, cbank rate poll)
By Jason Hovet
PRAGUE, March 19 (Reuters) - The Hungarian forint firmed
past 300 to the euro on Thursday, and the Polish zloty rose 1
percent to lead gains for central Europe's currencies, boosted
by a falling dollar.
The U.S. Federal Reserve's decision to start large-scale
buying of government debt surprised markets late on Wednesday,
sending the dollar to its largest daily loss in more than two
decades on oversupply concerns. []
The move also gave an overnight lift to central European
currencies, which held gains in Thursday trade after firming in
recent weeks on the back of improved global appetite for risk,
reflected in rising stocks and emerging markets.
The forint <EURHUF=> rose 1.6 percent from Wednesday's
domestic close, bidding at 297.15 per euro by 1207 GMT. The
Polish zloty <EURPLN=> gained to 4.534 per euro, while the Czech
crown <EURCZK=> rose 0.7 percent to 26.853.
But strategists and dealers said the currencies would likely
give up some gains as anxiety remained around the region's
growth, banks and external deficits, and further gains for
global equities looked set to slow.
"...It does look like we are heading north (weaker) again in
the crosses today, and unless we get some positive news today,
equity market action will remain muted," a note from brokerage
Cheuvreux said.
The broker added it preferred to remain exposed to the Czech
Republic and Poland in the mid-term.
Hungary's central bank is expected to hold rates at the
monetary council's meeting next Monday, a Reuters poll showed on
Thursday. The median forecast in the poll sees the Hungarian
economy shrinking by 4.5 percent this year. []
Stock markets in Europe edged higher on Thursday, with
central Europe's markets following behind.
In Romania, the leu <EURRON=> was stable against the euro,
and has traded within tight ranges around 4.29 for weeks as
markets await the outcome of Bucharest's negotiations with the
International Monetary Fund for an aid package.
The leu has shown little reaction to the prospects of
Romania getting financial aid even though many economists say
such a package would be a positive sign for the overstretched
economy.
PAYING DEBTS
Central European currencies have dropped by up to 25 percent
since touching record highs last summer as the region's
export-reliant economies get dragged lower in the global
slowdown, and worries over external financing mount.
A recent rally in currencies, with 3-4 percent gains in the
past two weeks, has helped breathe some life back into bond
markets, with Hungarian yields especially ticking down.
Hungarian debt management agency AKK on Wednesday soaked up
more than 60 billion forints' worth of papers in total at
buyback auctions at yields well below the market, squeezing
overall yields as well.
But dealers said a turnaround was still not completely in
motion.
"There are still very few deals, prices are very fragile,
and especially the short end is vulnerable," a dealer said.
Czech bond yields were up slightly. On Wednesday, the
Finance Ministry sold far more 10-year bonds than planned at its
first auction of fixed rate state bonds since October, although
at a fairly high cost. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.853 27.042 +0.7% -0.37%
Polish zloty <EURPLN=> 4.534 4.575 +0.9% -9.24%
Hungarian forint <EURHUF=> 297.15 301.93 +1.61% -11.31%
Croatian kuna <EURHRK=> 7.452 7.445 -0.09% -1.17%
Romanian leu <EURRON=> 4.305 4.294 -0.26% -6.75%
Serbian dinar <EURRSD=> 94.309 94.298 -0.01% -5.12%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +23 basis points to 235bps over bmk*
4-yr T-bond CZ4YT=RR +9 basis points to +249bps over bmk*
8-yr T-bond CZ8YT=RR +9 basis points to +332bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -17 basis points to +1079bps over
bmk*5-yr T-bond HU5YT=RR -50 basis points to +1032bps
over bmk*
10-yr T-bond HU10YT=RR -32 basis points to +899bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1307 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 and
Marton Dunai; Editing by Ruth Pitchford/Victoria Main)
