* Crown gains, other currencies track euro lower
* Hungary, Czech industry growth well above forecast
* Hungary 2010 budget on target, forint still vulnerable
* FX correction possible after sharp gains this week
(Updates throughout)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, Jan 7 (Reuters) - Technical factors
boosted the Czech crown on Friday as other central European
currencies tracked a weaker euro, little moved by news that
Hungary met a budget target and industrial output in the region
stayed buoyant.
The crown continued to test resistance levels, but dealers
said it looked ready for a correction along with its peers after
strong gains at the start of 2011.
Weaker than expected U.S. jobs data also put a dampener on
the region's currencies.
The crown and Polish zloty have each gained around 2 percent
since the turn of the year, with expectations growing that
Poland's central bank will soon begin tightening monetary
policy.
The crown <EURCZK=> rose 0.2 percent to bid at 24.576 to the
euro by 1524 GMT, while the zloty <EURPLN=> dipped 0.2 percent
to 3.873, off nine-month highs hit this week.
The crown briefly touched the psychological 24.500 per euro
level that had provided resistance last year when the currency
was approaching highs last seen in 2008.
Dealers said this level would probably act as a brake on
gains for the currency, with 24.800 a ceiling to any weakening.
For the zloty, 3.90 per euro was seen as a resistance level.
Komercni Banka analyst Miroslav Frayer said the crown would
try to test 24.50 and also 24.35, its 2010 high, in the coming
month, but was likely to stall or correct slightly in the short
term.
"The strengthening at the beginning of the year was very
significant and is not sustainable," Frayer said.
The forint <EURHUF=> was off 0.1 percent at 276.38 to the
euro and the Romanian leu <EURRON=> lost 0.2 percent.
INDUSTRY ON RISE
Currencies for the most part shrugged off November
industrial production data in Hungary and the Czech Republic
that showed above-forecast rises of 14.5 percent and 15.9
percent respectively. []
The region's currencies are tipped to gain this year -- led
by the zloty and crown -- as economic recovery gains traction.
<CEEFXPOLL01>
But the drop in the euro, central Europe's reference
currency, to four-month lows against the dollar hit the region
on Friday.
News that Hungary met its 2010 budget target of 3.8 percent
of GDP also failed to impact markets, which are wary of the
country's short-term revenue measures and the growth-limiting
impact of special corporate taxes. []
Yields on Hungarian bonds rose by up to 6 basis points on
maturities of less than 5 years, continuing the trend of a
steeper yield curve that has marked the beginning of 2011.
Dealers said the move in yields was muted and due mainly to
worries about the euro zone periphery and a stronger dollar.
"Early this week there was some buying in the 2- and 3-year
segment. There may be short positions there and this slows the
rise of yields at the short end (of the bond yield curve)," one
Budapest-based trader said.
The forint remains the most vulnerable currency in the
region, and markets are looking to February when the government
should announce more sustainable austerity measures. Further
volatility could be sparked if this is not delivered.
The outlook for Romanian assets improved late last year
after the government survived two no-confidence votes and passed
key legislation that the IMF says will allow significant future
budget savings.
The International Monetary Fund's board will review
Romania's 20 billion euro aid package on Friday. The country is
set to receive the next tranche from the IMF worth about 900
million euros, and more than 1 billion from the EU Commission.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.576 24.633 +0.23% +1.73%
Polish zloty <EURPLN=> 3.873 3.866 -0.18% +2.19%
Hungarian forint <EURHUF=> 276.38 276.07 -0.11% +0.58%
Croatian kuna <EURHRK=> 7.402 7.398 -0.05% -0.3%
Romanian leu <EURRON=> 4.261 4.254 -0.16% -0.66%
Serbian dinar <EURRSD=> 105.93 105.917 -0.01% 0%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 97bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +84bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +96bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +7 basis points to +659bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +597bps over bmk*
10-yr T-bond HU10YT=RR -15 basis points to +511bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1626 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marius
Zaharia/Jason Hovet; editing by Stephen Nisbet, John
Stonestreet)
