(Adds new details in para 8, last five paras, updates
prices.)
By Sandor Peto and Marius Zaharia
BUDAPEST/BUCHAREST, Dec 17 (Reuters) - Central European
currencies were mixed on Wednesday after the Czech central bank
cut interest rates by 50 basis points to 2.25 percent in the
latest move to bolster growth in the region's emerging markets.
The Czech crown <EURCZK=> moved little after the decision,
which was in line with consensus expectations.
Other rate cuts are expected to follow in the region,
potentially weighing on currencies, but market turnover was
moderate as trade wound down toward the year-end.
The Polish zloty <EURPLN=> extended losses, while Hungary's
forint <EURHUF=> was shielded by a jump by shares on the
Budapest bourse due to news that a Middle East investor wants to
build a seven percent stake in MOL <MOLB.BU>. []
The crown firmed 0.32 percent against the euro by 1522 GMT
to 26.26, the zloty shed 1.06 percent to 4.118 and the forint
firmed by 0.29 percent to 266.66. Romania's leu <EURRON=>
weakened by 0.53 percent to 3.955.
Some analysts had speculated the Czech bank could cut by a
more aggressive 75 basis points and dealers said the bank was
likely to reduce rates further at a gradual pace.
"(The decision) was mostly expected," said Dalimil
Vyskovsky, bond trader at Komercni Banka. "I think rates should
head lower, but it will be slow as we have done a lot recently."
The bank said downside risks to inflation pointed to
possible further rate easing. []
Currencies in the region firmed briefly overnight after a
deep rate cut by the U.S. Fed. [].
But analysts said the region remained exposed to the global
credit crunch and recession in their main export markets that
would help trigger further central bank interest rate cuts.
Goldman Sachs said in a note that dollar weakness in the
wake of the Fed rate cut was broadly supportive to emerging
market currencies, but European emerging markets were "the most
vulnerable in a global environment of tight financing".
The Polish and Hungarian central banks are expected to cut
interest rates again next week.
Polish Finance Minister Jacek Rostowski said lower rates
would be the best remedy for the economy's slowdown
[], while central bank chief Slawomir Skrzypek said
he could not rule out intervention to stem the zloty's slide.
[]
Hungary's forint remained steady at levels which dealers
said may allow the central bank to deliver its third 50 basis
point interest rate cut in four weeks next Monday, bringing
rates to 10.0 percent.
"Views about the possibility of a cut are split even within
the room," one Budapest-based dealer said.
"I think they can test the market as the forint is stable
between 260 and 270... interest rate swaps, bond yields
corrected upwards recently but are going down again, I think the
majority in the market expects a rate cut."
Central bank governor Andras Simor said the bank had no
exchange rate target, but among market factors the exchange rate
was a key influence on monetary policy decisions.[]
Serbian Deputy Prime Minister Mladjan Dinkic also said that
the central bank is expected to lower interest rates soon in
response to lower price pressures.[].
In Romania, the leu bucked the trend in early trade but
weakened later. Dealers said rumours about central bank
intervention in the past days had helped the currency and it can
get further support from news about the incoming government.
"The rapid announcement of the new ministries and members
should allay any further fears of uncertainty on the part of the
coalition parties' commitments to work together to tackle the
difficult year ahead," BNP Paribas said in a note.
The Democrat-Liberals and Social Democrats, who have forged
a governing coalition, continued their talks on the new
government, after posting their draft programme on Tuesday
[].
They are expected to come up with the names of the future
ministers on Thursday and a final governing programme on Friday.
Anticipations of rate cuts improved sentiment in Poland's
and Hungary's government bond markets, yields dropped and
traders said prices may extend gains if interest rates are cut.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 26.263 26.348 +0.32% +0.88%
Polish zloty <EURPLN=> 4.118 4.075 -1.06% -14.37%
Hungarian forint <EURHUF=> 266.66 267.43 +0.29% -5.46%
Croatian kuna <EURHRK=> 7.2 7.189 -0.15% +1.73%
Romanian leu <EURRON=> 3.955 3.934 -0.53% -10.47%
Serbian dinar <EURRSD=> 85.462 85.113 -0.41% -8.51%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +11 basis points to 167bps over bmk*
5-yr T-bond CZ5YT=RR +12 basis points to +146bps over bmk*
10-yr T-bond CZ9YT=RR +8 basis points to +119bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +18 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +309bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +259bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -25 basis points to +752bps over bmk*
5-yr T-bond HU5YT=RR -36 basis points to +699bps over bmk*
10-yr T-bond HU10YT=RR +19 basis points to +521bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1622 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus; Writing by Marius Zaharia;
Editing by Patrick Graham and Andy Bruce)
