(Adds detail, quotes)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Dec 11 (Reuters) - The Polish zloty
recovered from early losses, driving most of the region higher
late on Thursday, in a profit-taking spree after corporate
concerns had weakened it close to the psychological 4.0 level.
The zloty, which has lost a quarter of its value since July,
has been hit in recent days by worries that Polish companies may
have to write off large amounts of euros after hedging contracts
went the wrong way due to the unit's earlier losses.
The zloty's weakness has been driving the forint higher for
most of the Thursday session with investors buying the Hungarian
currency while selling the Polish zloty.
"There is ... a recent play in effect to bet on zloty
weakening and a stronger forint," a Budapest-based dealer said.
But in late trade, the zloty <EURPLN=> rebounded strongly
from an almost two- and a half-year low of 3.9880 per euro,
driving other currencies higher as well. At 1500 GMT, it traded
1.4 percent firmer at 3.897 per euro
"What may be happening is speculators ... pushing the zloty
weaker, and when the rate hit 4.0 taking profits," said one
analyst in London. "That explains the big swing"
In Hungary, November inflation, which came up much lower
than expected at 4.2 percent and surprised even the central bank
[] did little for the forint <EURHUF=>, which traded
0.3 percent higher at 262.9 per euro.
But Romanian inflation, which also slowed more than
expected, helped weaken the leu as it made some investors bet
the central bank will switch to a rate easing cycle early next
year [].
The Romanian leu has been hit by political uncertainty,
following Nov. 30's inconclusive parliamentary election and
worries that the future government will follow through with
pre-election promises to boost social spending.
Most foreign players stayed off Romanian markets, waiting to
see which reforms the future cabinet will announce, leaving most
trading to locals and the leu in a weakening trend as retailers
packed up for Christmas and on profit repatriation.
The leu <EURRON=> had firmed briefly in the middle of the
session, with dealers citing rumours the central bank had
intervened to prop up the currency, but overall bucked the
regional trend to last trade 0.8 percent weaker at 3.912 per
euro.
"Most of the market players speculated that the (euro)
selling interest that (briefly) appeared ... came from the
central bank, in another attempt to defend the currency,"
Piraeus Bank said in a research note.
The Czech crown <EURCZK=> also recovered from early losses,
triggered by disappointing economic growth data on Wednesday to
trade virtually flat in late deals.
In bond markets, Hungarian yields fell 20-25 basis points
along curve, in further reaction to debt financing plans
released Wednesday [].
Traders also said the inflation data, which fueled
expectations for a new rate cut, boosted the market.
"It's because of the debt agency plan and the inflation
data," a fixed income trader said.
In Poland, the finance ministry said it would offer
long-term bonds at a tender on Dec. 17 after Wednesday's 2-year
paper auction showed market conditions were favourable
[].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.795 25.802 +0.03% +2.65%
Polish zloty <EURPLN=> 3.897 3.952 +1.39% -8.23%
Hungarian forint <EURHUF=> 262.9 263.61 +0.27% -3.97%
Croatian kuna <EURHRK=> 7.18 7.189 +0.13% +2%
Romanian leu <EURRON=> 3.912 3.881 -0.8% -9.27%
Serbian dinar <EURRSD=> 85.731 84.313 -1.68% -8.85%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +16 basis points to 156bps over bmk*
5-yr T-bond CZ5YT=RR -10 basis points to +125bps over bmk*
10-yr T-bond CZ9YT=RR -24 basis points to +94bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +7 basis points to +343bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +292bps over bmk*
10-yr T-bond PL10YT=RR -10 basis points to +243bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +12 basis points to +698bps over bmk*
5-yr T-bond HU5YT=RR +15 basis points to +652bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +486bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1700 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaux, Writing by Dagmara Leszkowicz
and Marius Zaharia, Editing by Toby Chopra)
