* Region up, buoyed by bearish dollar sentiment
* Hungarian assets in favour after govt fiscal package
* Czech rates, Romania growth eyed
(Updates prices, adds strategist comment)
By Marton Dunai and Jana Mlcochova
BUDAPEST/PRAGUE, April 20 (Reuters) - Hungarian assets
rallied on Wednesday as investors favoured the forint over the
Polish zloty in a generally risk-friendly market that also saw
gains for the region's stocks.
Concerns over the U.S. fiscal situation after Standard &
Poor's cut its U.S. credit rating outlook to negative on Monday
continued to fuel bets against the dollar, benefiting currencies
of emerging European countries with lower public debt than
struggling euro zone states.
Demand was underpinned by a surge in the euro to a 15-month
high after a bond auction by Spain was well received by
investors. Emerging European currencies tend to track the euro's
moves against the dollar.
"We have a lot of investors ... who trade CEE countries as a
pack. When they have a bearish view on the dollar against the
euro, they also have the bearish dollar view against the CEE
countries," said Barclay's Capital strategist Koon Chow.
"It's not that they are loving the region but they are just
hating the dollar, they ask what's going to be on the other side
of my hate-dollar trade, what gives me yield," Chow said.
With an official cost of borrowing of 6 percent, Hungary
offers yield and the forint was up 0.7 percent against the euro
by 1336 GMT <EURHUF=> after breaking through a key resistance
level.
The forint has trended higher since the government announced
more details of its fiscal reform package last Friday, and some
dealers said investors were buying it against the zloty.
"The long zloty/forint squeeze is pretty strong right now,
plus we broke through the 265 (forint/euro) technical level,
with the next stop at 262-263," a dealer in Budapest said.
Hungary's economy minister also announced new fiscal and
growth-boosting measures, saying the government would cut
bureaucratic costs for companies by 500 billion forints this
year and end all personal income tax credits by 2013.
[] []
Hungarian bonds eroded some of their earlier sharp gains in
the afternoon on light profit taking, a fixed income trader
said. He said government bond yields fell as much as 15-20 bps
earlier in the day, but recovered some ground later.
Stockmarkets across central Europe also rose, led by
Budapest where the blue chip index <> gained 1.7 percent,
while stocks in Bucharest <> and Warsaw <> each gained
1 percent and Prague <> was up 0.5 percent by 1347 GMT.
POLISH GROWTH
Although Hungarian assets outperformed, analysts said the
zloty <EURPLN=> could also strengthen further in the coming days
on growing appetite for risk globally.
The Polish Economy Minister said economic growth in Poland
could reach 4.5 percent in the first quarter. []
"The zloty could strengthen against the basket of currencies
on the wave of global tendencies. It should fluctuate around
3.95-3.97 against the euro," Bank Pekao analysts wrote in a
daily report.
The Czech crown <EURCZK=> and the Romanian leu <EURRON=>
were little changed.
Monday's easing of a political crisis in the Czech Republic,
as the three-party coalition agreed to stay in government and
reshuffle the cabinet following a corruption scandal, has
supported the crown. The government though still faces a
no-confidence vote initiated by the leftist opposition, which
will be held just after the Easter break on April 26.
"We view the government's status quo as market positive. The
no-confidence vote will be hard to pass, as the opposition would
need the support of 19 rebels from the coalition parties," said
Pavel Sobisek, an analyst in UniCredit.
Czech interest rates remain at record lows and though an
increase is on the cards, the precise timing is not yet clear,
Czech central bank Vice Governor Mojmir Hampl said.
[]
Dealers said the leu was set to test resistance at about
4.0710-4.0720 per euro, around the one-year highs it hit last
month, after a World Bank report said Romania would lead
economic growth among the newer European Union members in 2012.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.167 24.143 -0.1% +3.45%
Polish zloty <EURPLN=> 3.966 3.97 +0.1% -0.2%
Hungarian forint <EURHUF=> 263.78 265.65 +0.71% +5.38%
Croatian kuna <EURHRK=> 7.353 7.354 +0.01% +0.37%
Romanian leu <EURRON=> 4.087 4.083 -0.1% +3.57%
Serbian dinar <EURRSD=> 101.2 101.11 -0.09% +4.67%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to -13bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +46bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +69bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +317bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +313bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +283bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -22 basis points to +442bps over bmk*
5-yr T-bond HU5YT=RR -14 basis points to +420bps over bmk*
10-yr T-bond HU10YT=RR -18 basis points to +375bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1544 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux; Writing by Gergely Szakacs;
Editing by John Stonestreet and Susan Fenton)
