* FX, stocks down as investors cut risk
* Zloty gives up IMF gains, crown hits 2-1/2 week low
* Hungarian cbank holds rates, forint slips
(Updates throughout)
By Jason Hovet
PRAGUE, April 20 (Reuters) - Investors cut back on riskier
holdings on Monday as optimism over the global economy faded,
pushing the Polish zloty to a one-week low and wiping out its
gains from news of an IMF credit line last week.
Other emerging European currencies slipped along with stock
markets, while Hungary's central bank failed to surprise and
kept interest rates flat at 9.5 percent for a third straight
month due to the volatile forint. []
The zloty <EURPLN=> lost 2 percent to 4.381 to the euro by
1318 GMT, returning to levels seen before last Tuesday's
government announcement that it would seek $20.5 billion under
the International Monetary Fund's new flexible credit line.
"Sentiment has shifted, and investors are more realistic on
the global economy," said Danske bank emerging market analyst
Stanislava Pravdova. "We may be seeing some (economic)
stabilisation, but that will take some time to show."
Polish industrial output fell by a much less than expected 2
percent annually in March, data showed on Monday, compared to
drops of around a fifth for some peers. []
But Germany's central bank said on Monday the euro zone
giant's recession intensified in the first quarter, darkening
prospects for central Europe's export-led economies. Global
policymakers also moved to temper optimism. []
Investors booked profits after the zloty had jumped more
than 4 percent to a 3-month high last week, but strategists said
the IMF option would help buoy the zloty against peers and open
up more options to profit from cross-trades in the region.
Societe Generale on Friday recommended the zloty against the
forint or leu due to Poland's move to get the IMF credit line
and after its underperformance versus peers. []
PULLBACK
The zloty has led gains in central Europe with a 12.3
percent rise since mid-February, when it neared an all-time low,
but has lost 23.5 percent since July to lead regional losses.
The Czech crown <EURCZK=> fell to a 2-1/2 week low at 26.953
per euro, while Romania's leu <EURRON=> was little changed as
local markets were shut for the orthodox Easter holiday.
In Hungary, one of the hardest hit in the downturn, the
forint <EURHUF=> fell 0.7 percent from Friday's domestic close
to 298.5 per euro. The new government is set to cut spending
deeply under a strict new budget to help the country out of
recession. [] []
"Broader sentiment will continue to govern the forint's
course, local fiscal policy will have any impact on the exchange
rate only in the medium term," a local trader said.
Hungarian bond yields widened about 20 basis points.
Central Europe's stock markets have gained 20-30 percent
since March, and a survey by State Street Global Investors last
week showed aggregate flows into global emerging markets were at
its highest reading since June 2007.
But strategists expect currencies to weaken more against the
euro due to a grim economic outlook and lagging effects on the
financial system, but Poland is seen better placed than others.
"Fundamentally the situation remains quite difficult,"
SocGen emerging strategist Murat Toprak said on Monday.
"What we fear is a deterioration of the financial system in
central and eastern Europe because of an increase in
non-performing loans. That is our key concern going forward."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.953 26.788 -0.61% -0.74%
Polish zloty <EURPLN=> 4.381 4.295 -1.96% -6.07%
Hungarian forint <EURHUF=> 298.5 296.5 -0.67% -11.71%
Croatian kuna <EURHRK=> 7.395 7.381 -0.19% -0.41%
Romanian leu <EURRON=> 4.231 4.215 -0.38% -5.12%
Serbian dinar <EURRSD=> 92.727 92.84 +0.12% -3.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 215bps over bmk*
4-yr T-bond CZ4YT=RR +15 basis points to +204bps over bmk*
8-yr T-bond CZ8YT=RR +7 basis points to +288bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +26 basis points to +925bps over bmk*
5-yr T-bond HU5YT=RR +26 basis points to +884bps over bmk*
10-yr T-bond HU10YT=RR +26 basis points to +774bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1520 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Toby Chopra/Victoria Main)
