* FX mostly lower, forint leads losses, zloty gains
* Market eyes Polish rate decision due Wed
* Romania may ask for further IMF assistance-President
(Adds Romania, Hungary bonds)
WARSAW/BUDAPEST, March 30 (Reuters) - Central European
currencies mostly retreated in late trade on Tuesday with the
Hungarian forint leading losses, while the Polish zloty held
onto gains ahead of a central bank rate meeting on Wednesday.
Dealers said worries over Greece's debts still lingered
after its bond offer attracted lower-than-expected demand on
Monday, while the Hungarian central bank sent a dovish message
to markets, opening the window for further possible rate cuts.
Hungary and Romania both cut their key interest rates on
Monday.
"The Greek story is still there, plus the forint broke a key
technical level today and the central bank was dovish
yesterday," a Budapest-based currency dealer said.
The dealer said the forint eased past a key level at around
265.50/266 versus the euro and could now weaken towards
268.00/50. Another dealer also said a key resistance at 266 had
been broken.
Dealers said players were buying zloty and selling forints,
adding to the forint's losses.
By 1323 GMT the forint <EURHUF=> was down 0.6 percent
against the euro, while the zloty <EURPLN=> was up 0.2 percent.
The Czech crown <EURCZK=> was down 0.2 percent and the Romanian
leu <EURRON=> fell 0.3 percent.
In Romania, the central bank's unanimous decision to cut
interest rates by 50 basis points on Monday weighed on the leu,
as analysts said the bank sent a clear message that another
similar rate cut was possible. []
Romania's President said on Tuesday his country may ask for
further assistance from the International Monetary Fund after
its current deal expires, which analysts said would boost
investor confidence in the economy. []
The IMF said it was concerned over Romania's budget figures
so far this year but was confident the government could correct
any slippage.
POLISH RATE MEETING
Romania and Hungary cut their interest rates to record lows
on Monday and signalled they were ready to ease monetary policy
further as economic recovery across the region looked weaker
than previously expected. []
The two countries were among the hardest hit during the
economic downturn in Central and Eastern Europe and both took
International Monetary Fund support.
Analysts expect Hungary to pause at its April meeting though
due to parliamentary elections on April 11 and 25, which are
expected to usher in a new government formed by opposition
Fidesz party.
The elections are expected to increase fiscal uncertainty as
Fidesz has said a higher deficit of between 4.5 and 6.5 percent
of GDP this year could still be safely financed, and the economy
needed deep tax cuts.
"With market uncertainty likely to mount over the coming
weeks as a result of the election, the key question now is
whether the central bank would ease policy once more next month
or hold off until later," Commerzbank said in a note.
In Poland the central bank's Monetary Policy Council (MPC)
began a two-day meeting on Tuesday with analysts widely
expecting it to leave rates at an all-time low of 3.5 percent on
Wednesday.
The market expects two small rate rises later this year, but
analysts are unsure about the timing and more dovish comments
from the central bank on Wednesday could change the market view
on monetary tightening.
Hungarian bonds, which have rallied in recent weeks, were
basically steady after giving up morning gains.
"We have come down very firmly (in past weeks), without any
significant corrections. I think yields could fall another 30
bps but not more," a fixed income trader said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.446 25.394 -0.2% +3.43%
Polish zloty <EURPLN=> 3.873 3.881 +0.21% +5.96%
Hungarian forint <EURHUF=> 266.59 265.02 -0.59% +1.41%
Croatian kuna <EURHRK=> 7.26 7.26 0% +0.68%
Romanian leu <EURRON=> 4.071 4.058 -0.32% +4.09%
Serbian dinar <EURRSD=> 99.769 99.4 -0.37% -3.9%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -16 basis points to +60bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +101bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +92bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +379bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +303bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +240bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +461bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +406bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +372bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1523 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/Krisztina Than)
