* ECB keeps borrowing costs on hold, as expected
* Zloty little changed as market digests rate decision
* Romanian leu near 9-month highs after GDP data
(Updates with ECB rate decision)
By Pawel Bernat and Sam Cage
WARSAW/BUCHAREST, March 3 (Reuters) - Emerging European
currencies were little changed on Thursday after the ECB left
interest rates on hold and as market participants digested the
Polish central bank's decision to keep borrowing costs steady.
The European Central Bank left rates in the common currency
zone on hold at 1.0 percent as expected, despite some concerns
over inflation. []
Emerging European assets are influenced by events in the
euro zone, which is the region's main trading partner, and
currencies can track moves in the euro.
A Reuters poll does not see a euro zone interest rate rise
until the fourth quarter of 2011 although financial markets have
started to bet on a rise in the third quarter. [].
The Polish central bank's 10-strong Monetary Policy Council
left its main rate unchanged at 3.75 percent on Wednesday,
citing weak wage pressure and investments and high unemployment,
but signalled further monetary tightening ahead to cool
accelerating inflation. []
"After yesterday's decision the zloty weakened, but further
information from the press conference caused the unit's rebound
as the market read it as a signal for further hikes," a
Warsaw-based dealer said.
The zloty <EURPLN=> was hovering around its 200-day moving
average of 3.983 per euro by 1251 GMT while Polish bonds were
almost unchanged from Wednesday's levels when the rate decision
supported the shorter end of the curve.
"Today we await ECB remarks, particularly whether it is going
to sharpen its rhetoric. The prospects for potential rate
increases in the euro zone may translate into higher yields on
five-year bonds," a Warsaw-based fixed income dealer said.
LEU NEAR 9-MONTH HIGH
The Romanian leu <EURRON=> remained near nine-month highs
after final GDP figures for the fourth quarter showed the
country's economy contracted by a less-than-expected 0.6 percent
on an annual basis. []
"Overall, the figures are more positive than initial
expectations which ... bodes well for the economy this year," a
Bucharest-based dealer said.
Analysts polled by Reuters before a flash release last month
had forecast of a 1.5 percent contraction in GDP.
The Czech crown <EURCZK=> edged up 0.2 percent and Hungary's
forint <EURHUF=> was 0.1 percent stronger against the common
currency.
Dealers said the impact of Hungary's fiscal adjustment
package to cut its deficit, unveiled on Tuesday, had faded for
now.
The unveiling of the package had sent the forint lower as
investors were disappointed about a lack of details.
[]
Dealers said the forint could gain further if global
investor sentiment continued to improve. Sentiment picked up
slightly on Thursday as oil prices fell after the Arab League
said a peace plan for Libya was being mooted. []
"We're quiet, and the overall market optimism is probably
going to drive the forint stronger in the near term," a dealer
said in Budapest.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.214 24.254 +0.17% +3.25%
Polish zloty <EURPLN=> 3.981 3.98 -0.03% -0.58%
Hungarian forint <EURHUF=> 270.7 271.25 +0.2% +2.69%
Croatian kuna <EURHRK=> 7.409 7.413 +0.05% -0.39%
Romanian leu <EURRON=> 4.202 4.201 -0.02% +0.74%
Serbian dinar <EURRSD=> 103.61 103.91 +0.29% +2.24%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 18bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +76bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +81bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +345bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +336bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +301bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1351 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; Editing by Susan Fenton)
