* Currencies weaken
* Caution returns as stocks move mixed
* Czechs auction first fixed-rate bond since October
(Updates prices, adds comments, previous WARSAW)
By Jana Mlcochova
PRAGUE, March 18 (Reuters) - Central European currencies
edged down against the euro on Wednesday, led by the Czech crown
as markets moved cautiously after a recent rally.
Stocks in the region saw a mixed performance, taking away
currencies' recent support and leaving them rangebound, while
the dollar was lower before the end of a U.S. Federal Reserve
meeting later in the day. []
The Czech crown <EURCZK=> dropped 1.1 percent to 27.055 by
1630 GMT, correcting more than peers after its recent
outperformance. The zloty <EURPLN=> was 0.4 percent down against
the euro to bid at 4.572, while Hungary's forint <EURHUF=>
dipped 0.1 percent to 301.9 per euro.
Currencies are up 2-4 percent since March 6 after last week
going on their best run this year on the back of better global
sentiment due to signs that the banking sector was near a
turning point. But investors started booking profits on Tuesday.
"We are trading off equities a little bit," Calyon currency
strategist Stuart Bennett said. "There may be some people still
booking profit. Some caution has resumed... just in case there
is more bad news around the corner."
The leu <EURRON=> also fell 0.16 percent lower, 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.
President Traian Masescu said late on Tuesday said the aid
package could equal 20 billion euros. []
Investors also cautiously eyed the shaky Czech government
coalition after the main opposition party called a no-confidence
vote for next week. []
LOOKING AHEAD
Currencies have lost heavily since hitting record highs last
summer as central Europe's export-driven economies have been
hammered by the global slowdown and worries grow about some
countries' reliance on foreign financing.
Easing monetary policies have also accelerated drops that
have cut up to a quarter of currencies' values. Strategists have
expected further currency weakening in the coming months.
Polish output slumped in February, data showed
[], raising bets the central bank will cut rates.
Earlier on Wednesday Polish central banker Andrzej Wojtyna
said interest rates should remain unchanged or be cut by only
another 25 basis points due to the weak zloty. []
On bond markets, Czech yields rose after the Finance
Ministry sold much more 10-year bonds than planned at its first
auction of fixed rate state bonds since October on Wednesday,
although at a fairly high cost. []
In Hungary, bond yields fell towards the short end of the
curve after large government buyback auctions but long end
yields rose on continued foreign selling pressure.
"The state debt agency threw a fairly big rock in the pond
when it bought back over 60 billion forints worth of bonds," a
dealer said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.055 26.747 -1.14% -1.12%
Polish zloty <EURPLN=> 4.572 4.552 -0.44% -10.00%
Hungarian forint <EURHUF=> 301.88 301.51 -0.12% -12.7%
Croatian kuna <EURHRK=> 7.426 7.441 +0.2% -0.82%
Romanian leu <EURRON=> 4.295 4.288 -0.16% -6.53%
Serbian dinar <EURRSD=> 94.288 94.188 -0.11% -5.1%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 231bps over bmk*
4-yr T-bond CZ4YT=RR -30 basis points to +241bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +333bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +11 basis points to +433bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +377bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +307bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +10 basis points to +1070bps over bmk*
5-yr T-bond HU5YT=RR +43 basis points to +1007bps over bmk*
10-yr T-bond HU10YT=RR +32 basis points to +847bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1733 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Jason Hovet/Jana
Mlcochova; Editing by Ron Askew)
