* Zloty leads gains in region, boosted by rate hike calls
* Polish bonds stable, rate hike seen factored into prices
* Other FX mixed, investors await FED decision
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Nov 3 (Reuters) - The Polish zloty hit a one-week
high on Wednesday on the back of a rising euro and calls by two
Polish central bankers for a rate hike, while other currencies
in emerging Europe were mostly lower.
The zloty <EURPLN=> briefly touched the key resistance level
of 4.0 against the euro last week but has since trimmed most of
its losses and dealers expect the currency to move in a tight
range of 3.92-3.95 to the euro in Wednesday's session.
"Investors buy hard currencies usually at the end of the
month, pushing the zloty lower, but since then we had a couple
of data publications and comments on possible rate hikes which
boosted the zloty," said one Warsaw-based dealer.
A member of the central bank's Monetary Policy Council
(MPC), Anna Zielinska-Glebocka, said on Wednesday the council
should consider an interest rate hike after a series of
better-than-expected economic data. []
Her comments echoed those made by fellow MPC member Jan
Winiecki on Tuesday.
The policymakers' remarks followed Tuesday's finance
ministry inflation forecast showing consumer price inflation
likely accelerated by 2.9 percent on an annual basis last month,
well above the central bank's 2.5 percent target.
Deputy Finance Minister Ludwik Kotecki said Poland's
consumer price index should stabilise at around 3 percent in the
coming months and should not top 3.5 percent at the end of the
year. []
The market widely expects the 10-strong body to raise rates
from an all-time low of 3.5 percent but is split over the timing
of a hike.
By 1034 GMT the zloty was 0.6 percent up against the euro,
trading at 3.93.
Hungary's forint <EURHUF=> and the Czech crown <ERUCZK>
edged down some 0.3 percent and 0.1 percent respectively against
the euro.
Romania's leu <EURRON=> was a touch higher after the
country's central bank left interest rates flat on Tuesday, with
analysts saying political uncertainties and price pressures
caused by tax hikes meant cuts might be further away than
previously thought. []
Dealers also said markets across the region had mostly
adopted a wait-and-see approach ahead of an expected decision of
the U.S Federal Reserve on further monetary stimulus.
HIKES IN PRICES
Polish bonds were relatively steady with dealers saying a
possible rate hikes were already in prices.
"The (bond) curve is already pricing in rate hikes. The
question is whether there will be more (hikes) than those that
are in prices," said one Warsaw-based fixed-income dealer.
The 3x6 forward rate agreements (FRA), which projects where
three-month rates will be in three months' time, are now pricing
in a rise of 40 basis points, up 4 basis points since the end of
last week. The bank normally moves in multiples of 25 basis
points and narrowly rejected a 50 bps rise in September.
In Hungary, bonds were broadly steady as market watchers
were assessing the likely impact of recent government measures
on the domestic bond market.
In a move to reduce the 2011 budget deficit and finance tax
cuts, Budapest has decided to suspend employees' payments into
private pension funds from November.
It also wants masses of people to leave the funds and step
back into the state pension system by the end of 2011 as that
would provide further fiscal room.
Traders said liquidity in the domestic market was expected
to drop due to the measures affecting private pension funds,
which have been key buyers of Hungarian bonds.
"Yields are not moving anywhere right now. There is
uncertainty and no one knows which way we will go," one
Budapest-based trader said. "I estimate that the turnover linked
to private pension funds is about 30 percent of volume."
In the Czech Republic, the government used an emergency
legislative process to push four austerity bills that are
factored into the next year's budget through the lower house
late on Tuesday. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.515 24.493 -0.09% +7.35%
Polish zloty <EURPLN=> 3.93 3.953 +0.59% +4.43%
Hungarian forint <EURHUF=> 271.8 271.09 -0.26% -0.53%
Croatian kuna <EURHRK=> 7.345 7.346 +0.01% -0.49%
Romanian leu <EURRON=> 4.289 4.291 +0.05% -1.2%
Serbian dinar <EURRSD=> 107.41 107.53 +0.11% -10.73%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 83bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +84bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +113bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +377bps over bmk*
5-yr T-bond PL5YT=RR +12 basis points to +360bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +325bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +517bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +456bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1135 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Patrick Graham)
