* Forint and zloty fall more than 1 pct, stocks drop
* Dealers, strategists say downward trend not over
* Hungarians sell more T-bills than expected, yields lower
(Adds central banker comments, updates prices)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, March 17 (Reuters) - Poland's zloty and the
Hungarian forint fell versus the euro on Tuesday when a rally in
European stocks lost momentum, reversing some of emerging
European currencies' recent gains.
European stocks fell 1-2 percent on Tuesday to end a
week-long winning streak and knock back the forint, zloty and
Czech crown, which had rallied by up to 6 percent in the past
six sessions. []
At 1635 GMT the forint <EURHUF=> was 1.1 percent down
against the euro to bid on the weak side of 300 [],
and the zloty <EURPLN=> fell 1.7 percent to 4.54 per euro as
investors booked profits, dealers said. []
The Czech crown <EURCZK=>, the region's best performer this
year, was steady but off morning highs at 26.625 per euro.
Investors' appetite for risk has picked up in recent weeks
on the back of hopes the troubled global banking sector may be
turning around, giving currencies their best run this year.
The Swiss central bank's move to sell the franc also gave
support and brought relief to central European borrowers who
sought franc loans due to higher domestic borrowing costs.
But dealers and strategists said the depreciation trend that
started last year when the global financial crisis accelerated
had not yet been halted, and that market bets on further gains
in the short run were now getting squeezed.
"This looks to be a nice squeeze of positions from people
thinking the world was a better place," a London dealer said.
The region's currencies are still sharply down since the
fall of Lehman Brothers last September, with the zloty down 25.8
percent and the forint 19.5 percent. Romania's leu is 15 percent
off since mid-September, and the crown has dropped 10 percent.
But the forint's recovery from record weakness beyond 317
hit earlier this month has lifted debt markets. Hungary sold
more three-month bills than planned on Tuesday. []
NOT OVER YET
The leu <EURRON=> also inched lower on Tuesday, though it
has held up well in the last month compared with its peers as
investors await signs of how much money the country may seek in
external aid from the EU, IMF and other financial institutions.
Most analysts say concerns over growth, financing and cuts
in local interest rates will keep markets under pressure. A
World Bank official said on Tuesday that eastern Europe and
central Asia would see zero growth this year. []
"The rebound in financial markets across the region over the
past week or so has been driven by a general improvement in
global risk appetite, rather than macroeconomic fundamentals or
a concerted policy response," Capital Economics said.
The zloty's sharp reversal from record highs in the summer
has left Polish companies exposed to $5 billion in soured
currency options and forward contracts. []
The Polish central bank has cut interest rates by a total of
200 basis points since late last year, and is expected to cut by
another 25 basis points at its March sitting next week.
Polish rate setter Jan Czekaj said on Tuesday the central
bank should continue to cut interest rates to help maintain
growth, but the pace of easing should slow. []
Analysts expect Romanian and Hungarian rate setters to move
cautiously due to market fragility. Czech central bankers said
last month currency weakness could lead to rate hikes, but the
crown's recent strengthening has opened up space, analysts say.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.686 26.62 -0.25% +0.25%
Polish zloty <EURPLN=> 4.54 4.464 -1.67% -9.36%
Hungarian forint <EURHUF=> 300.5 297.25 -1.08% -12.3%
Croatian kuna <EURHRK=> 7.447 7.425 -0.3% -1.1%
Romanian leu <EURRON=> 4.291 4.281 -0.23% -6.45%
Serbian dinar <EURRSD=> 94.187 94.443 +0.27% -5.00%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -30 basis points to 202bps over bmk*
4-yr T-bond CZ4YT=RR -29 basis points to +241bps over bmk*
8-yr T-bond CZ8YT=RR +3 basis points to +304bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +8 basis points to +426bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +370bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +297bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +1051bps over bmk*
5-yr T-bond HU5YT=RR -15 basis points to +964bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +814bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1740 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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emerging market news []
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(Reporting by Reuters bureaus, Writing by Jason
Hovet/Dagmara Leszkowicz; Editing by Stephen Nisbet)
