* FX weakens slightly, trade quiet due to U.S. holiday
* Mkt awaits any EU decisions on Greek help
* Polish zloty unfazed by CPI
(Adds Polish inflation data, quotes)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Feb 15 (Reuters) - Central European
currencies weakened on Monday as investors shrugged off a blip
in Polish inflation and awaited the outcome of a finance
ministers summit for more clues on potential aid for Greece.
Euro zone finance ministers, who on Monday began a two-day
meeting to discuss the crisis of confidence in debt-laden
Greece, were expected to insist on more painful medicine.
[]
Dealers said currencies in the region were volatile as the
U.S. market was closed for a national holiday, but said the
region could rally if a Greek bail-out emerges on Tuesday.
"For the zloty as well as for other currencies in the region
the most important thing will be what's going on in Greece and
how will the risk aversion of the markets change," said Timothy
Ash, an economist at Royal Bank of Scotland in London.
AT 1503 GMT, the Polish zloty <EURRON=> was 0.3 percent
weaker on the day as the market was unfazed by data showing
Polish inflation came in higher than expected at 3.6 percent in
January [].
Analysts said inflation was likely to slow in coming months
and kept their view that interest rates would remain flat for
the time being.
Elsewhere, the Czech crown <EURCZK=> was down 0.1 percent,
the Romanian leu <EURRON=> was up a touch and the Hungarian
forint <EURHUF=> was 0.7 percent weaker, but thin trade
exacerbated the move, traders said.
CROSS TRADES
Some dealers said they expected the region to rally if
European leaders announce financial aid for Greece on Tuesday,
although some market players already priced in a bail-out when
talk of a rescue emerged last week.
"If there is a clear (bailout) announcement on Greece
tomorrow (on Tuesday), I expect a rally," one dealer in
Bucharest said.
Longer term, dealers expect currencies to remain volatile as
the region pulls out of recession given risks related to bloated
budget deficits and elections.
The International Monetary Fund has warned Hungary it needs
to be ready to prevent an overshoot of its budget deficit target
of 3.8 percent this year [].
Moreover, market participants will remain worried about debt
problems in other euro zone countries, such as Spain and
Portugal.
On Monday, some Czech dealers noted some cross trades within
the region whereby the crown was used as a funding currency to
invest mainly in the zloty, which is seen outperforming due to
Poland's better economic outlook.
Czech retail sales fell by 1.9 percent year-on-year in
December, while in Hungary December industrial output rose 1
percent year-on-year, unchanged from a preliminary estimate.
The Czech data was better than expected but it still marked
a decline for a fifteenth straight month and analysts attributed
the better-than-expected reading to 'a pre-Christmas effect'.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.99 25.956 -0.14% +1.25%
Polish zloty <EURPLN=> 4.025 4.015 -0.25% +1.96%
Hungarian forint <EURHUF=> 272.41 270.61 -0.66% -0.76%
Croatian kuna <EURHRK=> 7.314 7.309 -0.07% -0.07%
Romanian leu <EURRON=> 4.121 4.124 +0.07% +2.82%
Serbian dinar <EURRSD=> 98.24 98.38 +0.14% -2.4%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +6 basis points to 104bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +145bps over bmk*
10-yr T-bond CZ10YT=RR -5 basis points to +122bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +328bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +555bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +512bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +454bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1703 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
and Marius Zaharia, editing by Susan Fenton)
