* FX drop, zloty holds near key level before output data
* Leu calm before govt budget meeting
* Investors shake off EU states's budget rule change
By Jason Hovet
PRAGUE, Aug 18 (Reuters) - The Polish zloty retreated
slightly from three-month highs on Wednesday, but held around a
key level as investors waited for industrial output data later
to assess the strength of central Europe's largest economy.
The zloty broke below the 3.95 per euro mark in the previous
session on the back of stronger equity markets, disregarding a
lower than expected rise in wage data on Tuesday that suggested
the central bank may not rush with rate hikes. []
Poland's growth accelerated to 3.1 percent year-on-year or
slightly more in the second quarter, Michal Boni, the top aide
to the country's prime minister, was quoted by the Dziennik
daily on Wednesday as saying. []
That is faster than most of its European peers, and dealers
said July industrial data could give a boost to the currency.
"If there won't be bad news from the (global) markets, the
zloty could calmly gain further. The zloty appreciation is
supported by the good fundamentals of the Polish economy," said
Sylwester Brzeczkowski, dealer RBS Bank in Warsaw.
The zloty <EURPLN=> bid 0.25 percent weaker from Tuesday's
domestic close at 3.953 to the euro by 0730 GMT.
Second-quarter GDP data last week from the Czech Republic,
Hungary and Romania showed stronger economies than thought, but
analysts say the pace of recovery is set to slow as consumer
demand remains sluggish and governments cut budgets.
Emerging Europe's export-driven economies may be hurt by a
slowdown in the euro zone's recovery, expected in the second
half of this year on the back of fiscal retrenchment and signs
the U.S. and Chinese economy are faltering.
"With global rates continuing to fall, yields and rates in
the EMEA region continue to tick down, as the market is scaling
down expectations of possible monetary tightening in the
region," Danske Bank said.
"Although we see a moderate deceleration in (Polish)
industrial output in July, we expect the outcome to surprise
somewhat on the upside compared with the consensus."
The Czech crown <EURCZK=> and Hungarian forint <EURHUF=> led
losses, dropping 0.3 percent, while Romania's leu <EURRON=> lost
0.2 percent.
Romania's centrist government will likely sign off on a
budget revision on Wednesday to reflect an economic contraction
of 1.9 percent this year and deficit of 6.8 percent of GDP,
agreed under its 20 billion euro IMF-led aid package.
Traders have said they expected the leu to remain stuck in a
4.2-4.3 per euro range as long as the government keeps its aid
deal on track and no major negative events hit central Europe.
Dealers also said investors have mostly shrugged off news on
Tuesday about plans to raise the issue of deducting private
pension payments from some, mostly east European countries'
deficits. []
"If anything, Germany's apparent objection to the plan is a
mild negative," a Budapest dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.833 24.763 -0.28% +5.98%
Polish zloty <EURPLN=> 3.953 3.943 -0.25% +3.82%
Hungarian forint <EURHUF=> 278.91 278.07 -0.3% -3.07%
Croatian kuna <EURHRK=> 7.268 7.25 -0.25% +0.57%
Romanian leu <EURRON=> 4.237 4.23 -0.17% +0.01%
Serbian dinar <EURRSD=> 104.51 104.39 -0.11% -8.26%
All data taken from Reuters at 0931 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; editing
by Patrick Graham)
