* FX little changed despite weaker euro
* HUF, PLN backed by rate hike expectations, gains limited
* Political tensions in Romania seen putting leu at risk
(Adds fresh quote, detail)
By Marius Zaharia and Marcin Goettig
BUCHAREST/WARSAW, Dec 15 (Reuters) - Central European
currencies were little changed in thin pre-Christmas trade on
Wednesday as rate hike expectations in Hungary and Poland
underpinned their units despite growing fears the euro zone debt
crisis will escalate.
CEE currencies usually track moves in the euro -- the
region's main reference currency -- which fell against the
dollar and hit a record low versus the Swiss franc on Wednesday
after Moody's said it might downgrade Spain's debt rating.
"I don't think currencies in CEE have much opportunity to
rally as they are too close to where the problems lie. Investors
are worried about Spain, Portugal and their banking systems and
contagion," Koon Chow, London-based FX strategist at Barclays
Capital said.
But expectations of rate increases helped the Polish zloty
<EURPLN=> touch its 200-day moving average and kept the
Hungarian forint <EURHUF=> below its 200-day average.
Hungary's central bank governor said on Wednesday the bank
would make "every effort" to cut price growth to its 3 percent
medium-term target by 2012 and would raise interest rates
further if necessary. []
"We think the December 20 meeting will be a close call ...
but the hawks should prevail again (25bp hike)," Pasquale Diana,
a London-based economist at Morgan Stanley, said in a report.
The NBH surprised markets last month by lifting its base
rate by 25 basis points to 5.5 percent, the first central bank
rate increase in the region since the 2008 global crisis.
Analysts say potential short-term forint gains are seen
limited by the risk of further government actions. Budapest has
already upset markets by reversing a pension reform and by
calling for the resignation of the central bank governor.
"We believe underlying conditions in Hungary, while getting
worse, are not as bad as generally perceived and from this
perspective the forint has potential to appreciate," said Robert
Beange, a London-based emerging market FX strategist at RBC.
"But in the next 6 months there are too many event risks, so
it will probably be stable."
At 1511 GMT, the zloty and the forint were virtually flat to
the euro, while the Czech crown <EURCZK=> and Romania's leu
<EURRON=> edged 0.1 percent lower.
In Poland, a closely-watched data release on Tuesday showed
November inflation at 2.7 percent on an annual basis, keeping
expectations for a rate hike in early 2011 intact.
Forward rate agreements (FRAs) 3x6 price in a 32 basis point
increase in rates over the next three months.
BONDS MIXED
Hungarian goverment bonds extended their gains, with yields
dropping by 5-7 basis points.
In Poland, short-end paper weakened slightly. Dealers
attributed the move to profit-taking and the weaker euro.
Poland sold 950 million zlotys worth of new five-year benchmark bonds maturing in 2016 at a switch tender on
Wednesday, but switch tenders usually do not have an impact on
the secondary market. []
In Romania, local assets continue to be affected by
political wrangling. The opposition has said it plans to file
another no-confidence motion against the government, which on
Tuesday submitted a key state wages reform bill to parliament.
Elsewhere, the Czech lower house approved next year's budget
bill, with a planned 135 billion crown deficit. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.152 25.137 -0.06% +4.64%
Polish zloty <EURPLN=> 3.987 3.986 -0.03% +2.93%
Hungarian forint <EURHUF=> 274.96 274.92 -0.01% -1.68%
Croatian kuna <EURHRK=> 7.392 7.393 +0.01% -1.12%
Romanian leu <EURRON=> 4.29 4.286 -0.09% -1.23%
Serbian dinar <EURRSD=> 104.38 105.11 +0.7% -8.14%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 84bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +70bps over bmk*
10-yr T-bond CZ9YT=RR +6 basis points to +83bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +330bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +294bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +632bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +566bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +482bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1611 CET.
Currency percent change calculated from the daily domestic
close at 1600 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 Catherine Evans)
