* Most currencies retrace some of week's gains
* Crown outperforms, gains as deficit worries abate
* Hungary cbank seen cutting rates by 50 bps on Monday
(Recasts throughout)
By Marton Dunai
BUDAPEST, Oct 16 (Reuters) - The Czech crown was stronger on
Friday morning as worries over a possible budget overshoot
abated, but other currencies took a breather after recent gains
as Romania's political turmoil hung over the region.
The crown <EURCZK=> outperformed the region after a weak
performance in recent sessions, gaining 0.2 percent by 0951 GMT.
The zloty <EURPLN=> slid the most at 0.5 percent, with the
forint <EURHUF=> following, down 0.3 percent.
Czech Prime Minister Jan Fischer said on Friday he expected
this year's public sector deficit to reach 6.5 percent of gross
domestic product, a smaller gap than that estimated by his
finance minister. []
"Maybe the market could be satisfied with today's comment
from Czech PM Fischer, who has said that the budget deficit
should... (be) in line with overall expectations," KBC Bank said
in a note.
The Romanian leu <EURRON=>, which had weakened to 7-month
lows after parliament toppled the government earlier this week,
was steady on Friday and dealers said it could recoup some of
its losses.
"The market has pretty much accepted that there won't be a
new prime minister until after the presidential elections in
December," a dealer in Budapest said. "(But) all in all, the
mess there does not warrant the leu's current weak levels."
That said, the broader concern is that an extended stalemate
will prevent the country taking hard budget decisions needed to
stabilise its still rocky finances and keep aid under its IMF
deal flowing.
Romanian President Traian Basescu nominated respected
central bank adviser Lucian Croitoru as prime minister on
Thursday, in a move likely to meet stiff opposition in
parliament and prolong a government crisis, analysts say.
The opposition, which controls over half of the legislature,
say they will oppose Croitoru in parliament, which has final say
under Romanian law. []
HUNGARY CBANK SEEN EASING
Hungary's central bank is expected to slash its key interest
rate to 7 percent from the current 7.5 percent, a Reuters poll
showed on Friday. []
The poll also predicted rates would bottom out lower than
previously thought and inflation would undershoot previous
estimates as the crisis eats into domestic demand and prices
remain under pressure.
Hungary's bond yields remained near 2009 lows as the market
priced in further rate cuts, a dealer said.
"The 50-basis point cut on Monday is a done deal," a dealer
said. "We have priced more cuts to 6 percent, at least. The
question now is, will (the central bank) go below 6 percent.
Polish and Czech bonds were mixed, with short-end yields
quoted higher than Thursday levels.
Warsaw took a blow to its privatisation plans -- key to
easing debt supply and stresses on the bond market next year --
when Germany's RWE <RWEG.DE> backed out of purchasing
state-owned utility ENEA <ENEA.WA>.
But Finance Minister Jacek Rostowski said on Thursday the
government would systematically reduce the shortfall from 2011
after it balloons to around 7 percent of GDP next year.
"The fiscal outlook appears somewhat better than the
government's outlook... (2010) Government debt should easily
stay below 55 percent," Barclays analysts wrote.
Poland will publish September wages at 1200 GMT, but markets
are not expected to move on the data. Analysts expect an annual
wage growth of 2.9 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.751 25.803 +0.2% +3.89%
Polish zloty <EURPLN=> 4.21 4.19 -0.48% -2.26%
Hungarian forint <EURHUF=> 267.62 266.88 -0.28% -1.52%
Croatian kuna <EURHRK=> 7.24 7.257 +0.23% +1.73%
Romanian leu <EURRON=> 4.286 4.286 0% -6.34%
Serbian dinar <EURRSD=> 92.99 93.043 +0.06% -3.77%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +19 basis points to +124bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +129bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +103bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +358bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +311bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +503bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +448bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +399bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1151 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai; editing by Patrick Graham)
