* FX stronger as worries over Ireland soften
* Polish data does not change rate view
* Hungary's bond auction disappoints on long end
(Updates with Poland data, Hungary auction)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Nov 18 (Reuters) - The Polish zloty and
Hungarian forint led emerging European currencies higher as the
dollar weakened on Thursday, but gains were limited by worries
that the euro zone debt crisis has further to run.
The Polish zloty held onto a 0.5 percent rise after data
showed corporate wages and employment increased last month,
which analysts said would do little to persuade rate setters to
budge next week on record low interest rates. []
The market has rowed back from its previous view that the
10-strong MPC would start raising borrowing costs already this
month after comments from policymakers suggested there may not
be a majority to back such a rate increase.
By 1503 GMT the zloty <EURPLN=> was up 0.5 percent to 3.939
to the euro. Bonds were little changed after the data.
"Wages are not boosting inflationary pressures and are
neutral for monetary policy. The MPC is likely to focus on
inflation and growth data," said Arkadiusz Krzesniak, Deutsche
Bank's chief economist in Warsaw.
He said he expected a first rate hike in January.
The shifting of rate hike expectations is not expected to
hurt the currency, but dealers said there was a strong appetite
for short-dated papers.
"If the market does not expect rate hikes, the overliquidity
in the banking sector may flow into short-dated papers," said
Krzysztof Izdebski, a dealer at PKO BP.
The 3x6 forward rate agreement (FRA), which projects where
three-month rates will be in three months' time, has fallen some
8 basis points in the past days and is now pricing in a rise of
32 basis points.
HUNGARY LONG-END UNCERTAIN
Hungary's forint <EURHUF=> added 0.4 percent. Romania's leu
<EURRON=> and the Czech crown <EURCZK=> were flat. Stocks rose,
with Budapest led by a rebound in OTP bank <OTPB.BU>.
Long-dated Hungarian bonds stayed under pressure and bids
for 10-year paper disappointed at a midday auction reflecting
nerves over the medium-term economic outlook. []
Hungary's government has committed to a budget deficit of
below 3 percent of GDP for next year, but its unorthodox policy
mix -- which includes windfall taxes on banks and various
sectors of the economy -- has raised concerns among investors.
The central bank, the independent Budget Council and the IMF
have all warned that betting on much faster economic growth from
2012-2013 could be overly optimistic and Hungary's deficit could
widen again after one-off measures expire.
Dealers said worries over Ireland's debt troubles had eased
somewhat after central bank Governor Patrick Honohan said it was
likely to end up taking a loan from the European Union and
International Monetary Fund worth tens of billions of euros.
"The (Irish) storm has abated for now," said one
Warsaw-based dealer. "...But we should remember that there may
be other troubled countries in the pipeline."
The Irish debt woes have hurt central European assets in
past days, though to a lesser extent than during the Greek
crisis in the spring when spillover risk was clearer due to
Greek banking exposure in the region.
Czech central bank Governor Miroslav Singer said on Thursday
that Ireland's crisis had no significant impact on the Czech
Republic because it has not affected the main euro zone
economies which are its main trade partners. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.626 24.615 -0.04% +6.87%
Polish zloty <EURPLN=> 3.939 3.958 +0.48% +4.19%
Hungarian forint <EURHUF=> 275.03 276.02 +0.36% -1.7%
Croatian kuna <EURHRK=> 7.393 7.393 0% -1.13%
Romanian leu <EURRON=> 4.295 4.295 0% -1.34%
Serbian dinar <EURRSD=> 106.85 106.76 -0.08% -10.27%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 71bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +68bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +92bps over bmk*
All data taken from Reuters at 1605 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Jason Hovet; editing by Patrick Graham and Giles Elgood)
