* Greece concerns depress emerging European currencies
* Bonds rebound after morning dip
(Updates markets)
By Marton Dunai
BUDAPEST, April 8 (Reuters) - Emerging European currencies
weakened on Thursday, led by the Polish zloty, as the Greek
crisis continued to weigh on markets, although the Czech crown
held steady.
"Sentiment worsened due to the recurring fears about
Greece's future," a FX trader at a Warsaw bank said.
Uncertainty over Greece continued to widen the premium
required by investors to hold Greek debt, sparking a selloff in
stocks and hurting East European assets as well. []
"In my opinion, if the sentiment continues to worsen, the
bourses will go down and there will be more rumours about
Greece, then regional currencies will continue losing. The zloty
in particular as there are a lot of open positions on it," the
trader added.
By 1428 GMT the Polish zloty <EURPLN=> shed 0.8 percent, the
Hungarian forint <EURHUF=> fell 0.7 percent and the Romanian leu
<EURRON=> dipped 0.7 percent against the euro, hitting its
lowest level in six weeks.
Deputy Governor of the Polish central bank, Witold Kozinski,
however, said the zloty was in a long-term appreciating trend
although his remarks failed to impress investors. []
Some analysts say the zloty could get support from two likely
interest rate hikes in the second half of the year, which could
bring the key interest rate up to 4 percent.
Investors in Romania are betting on a rate move in the
opposite direction when the central bank meets on May 4 and that
view was boosted by February industrial output data, released on
Thursday, which showed a 2.5 percent contraction.
[]
"Further rate cuts are expected to support a not yet
recovered economy," said one dealer with a foreign bank in
Bucharest.
The fall in output was another reason why the leu suffered.
BONDS RECOVER
Fresh fears about the stability of the Greek banking system
also weighed on bond prices in Poland but after a morning
sell-off prices clawed back and regained some of the lost
ground.
"There was a strong impulse at the beginning of the day as
everyone is eyeing what's going on in Greece ... as a more and
more bleak outlook comes from there," said Pawel Bialczynski,
fixed income trader at BRE Bank in Warsaw.
"The apex of this move was in the morning and since then the
situation calmed down a bit and prices are slightly higher now."
Hungarian bonds also regained some ground after a bond
auction that brought healthy demand especially at the long and
short ends, while supply remained low, a dealer said.
"The yield levels at the auction were surprisingly low," she
said. "A single investor snapped up the entire three-year
supply, and the 10-year paper was in demand as well."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.225 25.159 -0.26% +4.33%
Polish zloty <EURPLN=> 3.854 3.825 -0.75% +6.49%
Hungarian forint <EURHUF=> 267.95 266.18 -0.66% +0.9%
Croatian kuna <EURHRK=> 7.265 7.27 +0.07% +0.61%
Romanian leu <EURRON=> 4.117 4.088 -0.7% +2.92%
Serbian dinar <EURRSD=> 99.59 99.47 -0.12% -3.73%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +7 basis points to 75bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +89bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +85bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +365bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +311bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +254bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +464bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +406bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +369bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1628 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai; Editing
by Susan Fenton)
