By Jason Hovet
PRAGUE, Oct 6 (Reuters) - Emerging Europe currencies fell
sharply for the third straight day on Monday, prompting Serbia's
central bank to buy the dinar in the market and dealers to say
they expected Romanian authorities had stepped in as well.
Romania's leu <EURRON=> shed 1.9 percent to 3.949 against
the euro by 0910 GMT, after dropping as much as 2.4 percent and
following heavy losses last week to trade at its lowest since
January 2005.
At one point, the dinar <EURRSD=> lost as much as 2.6
percent on foreign selling, and Hungary's forint <EURHUF=> fell
1.4 percent to 247.55 per euro.
Dealers said it looked like the Romanian central bank had
asked a local bank to sell euros in the market. An advisor to
the central bank declined to comment.
"A big local bank is consistently selling euros. It looks
like an indirect intervention," a Bucharest dealer said.
Investors have grown concerned with countries such as
Romania, which runs a large current account deficit and is most
exposed to foreign credit, and have hoarded cash as euro credit
markets remain frozen.
Many analysts had expected the central bank could possibly
step in to prop up the currency at around the 4.10 level.
In Serbia, dealers said the central bank stepped in to prop
up the dinar for a second straight day. It stood 2 percent down
at 79.058 per euro at 911 GMT.
"Foreign players seem to have been ordered to sell
throughout emerging markets as they try to consolidate. The
selling started on Friday and we see them again this morning,"
one currency dealer said.
DARK OUTLOOK
The growing financial crisis spread deeper into Europe over
the weekend when the German government struck a deal to rescue
mortgage lender Hypo Real Estate, but euro zone leaders stopped
short of a coordinated bank bailout.
The United States adopted a $700 billion rescue package late
on Friday, which did little to reassure markets.
"For the time being the $700 billion rescue package failed
to provide adequate relief to markets," a Budapest trader said.
"Players are now assessing what extent of the damage it will
cover and given news from Europe about Germany guaranteeing bank
deposits, like Ireland, does not make too good an impression on
markets," the trader said.
Among other currencies, the Polish zloty <EURPLN=> fell 1.2
percent from Friday's domestic close to 3.437, while the Czech
crown <EURCZK=> dipped 0.4 percent to 24.883 per euro as it
finds support from local corporates around 24.90, dealers said.
Central European currencies have been dented as investors
scramble for cash, along with slower growth outlooks in the face
of weaker demand from the euro zone, its main trader partner.
But while credit markets in Europe have come to a
standstill, central European banks remain liquid and country
leaders from the region have worked to assure markets that their
banking systems were intact.
"Our banking sectors are healthy," a Prague-based foreign
exchange trader said. "But the slowdown in Europe will affect
our economies."
Slowing economic outlooks have also raised expectations that
interest rates will stay on hold for a while, or even, in the
case of the Czechs -- who were the first in the region to ease
monetary policy in August -- be cut by the end of the year.
Rates on the 2-year Czech interest rate swap <CZKAM6PR2Y=>
have dropped 20 basis points since the start of October.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.883 24.785 -0.40% +6.09%
Polish zloty <EURPLN=> 3.437 3.395 -1.24% +4.54%
Hungarian forint <EURHUF=> 248.600 244.100 -1.84% +1.68%
Croatian kuna <EURHRK=> 7.122 7.116 -0.08% +2.79%
Romanian leu <EURRON=> 3.949 3.875 -1.91% -10.3%
Serbian dinar <EURRSD=> 79.058 77.468 -2.05% -0.38%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +25 basis points to 47bps over bmk*
5-yr T-bond CZ5YT=RR +18 basis points to +33bps over bmk*
10-yr T-bond CZ9YT=RR +23 basis points to +35bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +20 basis points to +304bps over bmk*
5-yr T-bond PL5YT=RR +18 basis points to +254bps over bmk*
10-yr T-bond PL10YT=RR +13 basis points to +202bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +34 basis points to +670bps over bmk*
5-yr T-bond HU5YT=RR +33 basis points to +608bps over bmk*
10-yr T-bond HU10YT=RR +28 basis points to +568bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1110 CET.
Currency percent change calculated from the daily domestic
close at 1500 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 Jason Hovet; editing
by David Stamp/Victoria Main)
