* FX trims losses as euro rebounds vs dollar
* Poland prices its eurobond issue, bonds unchanged
(Updates throughout)
By Marton Dunai and Dagmara Leszkowicz
BUDAPEST/WARSAW, March 22 (Reuters) - Central Europe's
currencies reversed some of Monday's earlier losses as the euro,
the region's main reference unit, rebounded against the dollar.
The zloty <EURPLN=> and the Czech crown <EURCZK=> both shed
0.3 percent against the euro, while Hungary's forint <EURHUF=>
and Romania's leu <EURON=> were 0.2 percent weaker by 1502 GMT.
"The situation has changed slightly compared to the morning.
The euro rebounded and currencies in the region just tracked
it," said Przemyslaw Winiarczyk, dealer at Millennium bank in
Warsaw. "The word 'sentiment' is the key word for the market."
The zloty and the forint shot to 15-month highs last week
while the crown jumped to a five-month peak on an improving
economic outlook and lower debt levels.
The zloty has gained nearly 5 percent against the euro this
year and the crown and the leu have each added more than 3
percent in 2010, sparking talk of more dovish monetary policy
ahead in the region.
Jerzy Hausner, a new member of Poland's Monetary Policy
Council (MPC), said the zloty's strength was no cause for alarm
but added that coordinated action to weaken a currency can be
effective. []
"Attempts to weaken a currency can be partially effective,
particularly when they are backed by the central bank and the
government," Hausner told Reuters in an interview. "Cooperation
in this area is absolutely necessary."
"If the appreciation (process) is not too fast or too
volatile, then it's a positive phenomenon," he said. "It is
exchange rate volatility and an excessive pace of appreciation
that are damaging."
In the Czech Republic, analysts expect the central bank to
keep rates at their current record low at its next meeting on
Thursday. Although rates are seen rising later this year or in
early 2011, some see risk on the easing side.
"The risk of surprises at the meeting, if any, is that we
get slightly more dovish comments because of concerns about
further currency strength," Nordea said in a note. "We still do
not see any rate hikes this year."
Dealers say more gains are indeed possible.
"Generally the zloty should gain, but I would not be
surprised if it weakens even to around 4.0 to the euro in the
short-term," Winiarczyk said, citing the more subdued sentiment.
Hungary's forint has been overvalued at recent levels, which
points to another rate cut on March 29, analysts said.
"(The) current forint levels are ... fairly strong from a
fundamental point of view, boding well for (the) rate cut
outlook," CIB Bank analysts said in a note.
BONDS WEAKER
Hungarian bond yields rose about 4-5 basis points across the
curve after hitting multi-year lows in recent weeks, and Polish
bond yields were up some 1-1.5 basis points, dealers said.
They also said news about a new euro-denominated 7-year bond
issue did not affect the market.
Poland will probably price the issue at 100 basis points
over mid-swaps, a Thomson Reuters online news and market
analysis, IFR, said. Earlier the finance ministry said it had
picked HSBC, Citigroup Global Markets Ltd and Barclays Bank PLC
as lead managers for the issue. []
Sources close to the matter said the issue attracted orders
of at least 1.8 billion euros.
In Hungary, markets will be eyeing further comments by the
main Hungarian opposition party Fidesz on its economic plans
ahead of elections on April 11 and 25, which Fidesz is expected
to win with a wide margin over the ruling Socialists.
A top Fidesz strategist told Reuters on Friday that a budget
deficit of between 4.5 percent and 6.5 percent of GDP this year
could be safely financed. [] Fidesz has dismissed
the current 3.8 percent deficit target as "fiction".
If the party wins elections next month, it plans to
negotiate a precautionary standby agreement with lenders and
launch a three-year tax reform from 2011 to boost growth, the
strategist said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.422 25.355 -0.26% +3.52%
Polish zloty <EURPLN=> 3.899 3.886 -0.33% +5.26%
Hungarian forint <EURHUF=> 264.13 263.6 -0.2% +2.35%
Croatian kuna <EURHRK=> 7.259 7.256 -0.04% +0.69%
Romanian leu <EURRON=> 4.083 4.074 -0.22% +3.78%
Serbian dinar <EURRSD=> 99.44 99.58 +0.14% -3.58%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 87bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +121bps over bmk*
10-yr T-bond CZ10YT=RR +5 basis points to +108bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +314bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +254bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +488bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +439bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +413bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1602 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Marton Dunai and
Dagmara Leszkowicz; Editing by Stephen Nisbet)
