April 3 (Reuters) - The European Union's main emerging
currencies are expected to give up gains posted after the G20
summit, but they are expected to start to recover later this
year.
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ON REGION
ZSOLT PAPP, KBC, LONDON
"We have seen a sentiment rally. The G20 meeting has
somewhat reduced investors' risk assessment (aversion), but in
the medium term, macroeconomic question marks will dominate. I
expect sideways trading for most currencies in the region. I
would be very surprised at an extended rally. If the dollar
weakens further against the euro, mainly the zloty and the
Turkish lira can firm further."
"Looking further ahead, the region's currencies can
stabilise, but it is uncertain how much they will be able to
firm. But if economic prospects improve in a year and monetary
policies stabilise, all the currencies can strengthen. There are
question marks mainly about the Hungarian forint and the
Ukrainian hryvnia in the region, how their politics and fiscal
outlook will go."
NEIL SHEARING, CAPITAL ECONOMICS (April 2 note)
"Overall, the, the G20 has been positive news for Emerging
Europe. But while financial meltdown may just have been avoided,
the recession sweeping the region is set to deepen over the
coming months."
DANSKE BANK (April 4 note)
"Even though the G20 in general is positive for the CEE
economies, the extra funds do not change the fact that we are
likely to see a very sharp further correction in growth in the
region to adjust the major external imbalances. Extra IMF funds
will not help avoid a major correction in external imbalances in
the region, and the IMF will still demand significant fiscal
adjustments to provide loans to the CEE countries. However, IMF
funds should help to avoid a major funding crisis in the
region."
"Overall, we think that the G20 meeting is good news for
the CEE/EMEA in general, and we therefore have adjusted our PLN,
RON, CZK, HUF, ZAR and TRY forecasts in a slightly more positive
direction as a direct consequence of the result of the G20
meeting."
ON CZECH CROWN
JAROMIR SINDEL, CITIBANK, PRAGVUE
"We feel poor fundamentals point to a weaker koruna in a
range of 26.5 to 27 against the euro ... We believe the positive
interest rate differential between the CNB's and ECB policy
rates could limit weakening and support a mild appreciation in
second-half 2009."
"Last year, PM Miroslav Topolanek (ODS) announced a plan to
set a target date for euro adoption in November 2009. Reflecting
political developments, it is unclear whether it will
materialise. By contrast, if the early elections were held in
summer 2009 and the opposition CSSD won the elections, we would
see some chance of entering into the ERM-II in first-quarter
2010, (with possible adoption of the euro in 2013), as the CSSD
called for the adoption of the euro as soon as possible.
However, we do not believe that the current economic and
political environment points to entry into ERM-II soon."
VOJTECH BENDA, ING, PRAGUE
"The fact that the CNB returned to a dovish stance, the
further interest rate loosening anticipated by the market, as
well as the temporary period without government with confidence,
may well trigger renewed CZK weakening."
ON LEU
DAGMAR HAJKOVA, GENERALI PPF ASSET MANAGEMENT, PRAGUE
"We have seen stability in the EURRON recently, which was
enabled by central bank policy as well as negotiations with the
IMF. Reaching agreement with IMF under favourable conditions and
global risk appetite recovery will hold the leu around 4.30 for
upcoming weeks in our view. However, we expect concerns the
about depth of the recession in Southeastern Europe to return,
which could bring the leu to new lows. With the bottoming-out of
the economic crisis, the leu will start to appreciate again."
VLAD MUSCALU, ING BANK, BUCHAREST
"The recent appreciation looks short-lived and, after a
period of relative stability induced by the IMF/EU deal, the RON
could trade new lows as signs of sharp economic contraction
become clear."
CRISTIAN MLADIN, BCR, BUCHAREST
"After Romania concluded the EUR 20 bln financial package
negotiations, the RON has slightly firmed against the single
currency, to 4.27. RON has lately decoupled from its regional
peers, the stability being guaranteed by restrictive central
bank money market conditions, with a low level of liquidity, to
counteract the speculative movements."
"According to the IMF, it is normal for a central bank to
intervene to smooth out fluctuations of the national currency.
At the same time, it is normal to intervene, given the
importance of the inflation target, but not to defend a certain
level of the EUR/RON exchange rate. Monetary policy should allow
continued exchange rate flexibility "within the constraints
imposed by banking system stability". Taking all of this into
account, we think that the central bank will do its
utmost to contain the volatility of the RON in the near future."
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(Reporting by Sandor Peto; Editing by Kevin Liffey)
