* FX stronger following better sentiment, econ outlook
* Polish bonds stronger, Czech weaker ahead of auctions
* Romanian leu seems to stabilise ahead of elections
(Adds fixed income, detail)
WARSAW, Dec 2 (Reuters) - Emerging European currencies edged
higher on Wednesday following strong gains in the previous
session, with investors' appetite for riskier assets staying
firm on improving economic outlooks in the region.
Markets have been jolted in the past week by worries of
spreading debt woes from countries such as Dubai or Ukraine that
have highlighted central Europe's own struggles with mounting
government debt as the region pulls out of the economic crisis.
The region has rebounded strongly, underpinned by purchasing
managers' indices in the Czech Republic and Poland returning to
positive territory for the first time in more than a year this
week to signal an economic pickup. []
"I see appetite for CEE currencies, and the zloty has the
biggest potential due to its strong data," said one Warsaw-based
dealer. "For as long as there's no new bad news coming from
Dubai, units should gain with the zloty going even below 4.0 to
the euro till end-year."
At 0947 GMT Hungary's forint <EURHUF=> was 0.5 percent
stronger against the euro while the Polish zloty <EURPLN=> was
0.3 percent up versus the common currency.
Strategists have forecast gains for currencies in the coming
months and have been most bullish on the zloty as Poland is the
only country in the region to have avoided recession. It posted
better-than-expected third quarter economic growth on Monday.
The Warsaw dealer also said he expected the forint to rise
to around 263.0-265.0 to the euro in the mid-term, but he was
not bullish on the crown, though he said it may track peers.
The crown <EURCZK=> has traded in a wide range in the past
month, staying at previous levels on Wednesday. Dealers expect
high volatility until the new year as liquidity remains low.
Last week, emerging markets took a hammering when concerns
over Dubai's payment of its debt rose, although the dollar has
since retreated and raised risk appetite.
Bond markets in Hungary and Poland also firmed on Wednesday.
Poland holds a tender for 2-year and 5-year bonds at 1100 GMT.
By contrast, Czech paper yields were a touch higher before a
15-year bond auction in Prague, the last planned by the Finance
ministry in 2009.
"15Y papers have traditionally not been in extremely heavy
demand, though we expect the amount to be sold quite easily,"
Komercni Banka traders said in a note. It added that demand from
foreign accounts has waned recently.
ELECTION LOOMS
In Romania, the leu <EURRON=> missed out on gains to lose
0.1 percent to the euro.
But dealers said the currency may rejoin the region's firmer
trend after a runoff presidential vote due at the weekend that
could put an end to political turmoil that started with the
collapse of Romania's government in October.
"The closer we get to elections, the tighter the link with
the region," one dealer said. "We are normalising again, many
expect Romania to have a government soon and we are joining
regional trends again."
The second presidential runoff is due on Sunday Dec. 6 and
leftist leader Mircea Geoana is expected to unseat incumbent
President Traian Basescu in one of the country's most important
votes since the fall of communism in 1989.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.92 25.93 +0.04% +3.21%
Polish zloty <EURPLN=> 4.103 4.114 +0.27% +0.29%
Hungarian forint <EURHUF=> 270.47 271.8 +0.49% -2.56%
Croatian kuna <EURHRK=> 7.308 7.307 -0.01% +0.78%
Romanian leu <EURRON=> 4.248 4.242 -0.14% -5.5%
Serbian dinar <EURRSD=> 95.23 95.23 0% -6.04%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +4 basis points to 118bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +106bps over bmk*
10-yr T-bond CZ10YT=RR 0 basis points to +98bps 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 -1 basis points to +342bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +535bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +496bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +427bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0947 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; editing by Stephen Nisbet)
((dagmara.leszkowicz@thomsonreuters.com, RM:
dagmara.leszkowicz.reuters.com@reuters.net, tel +48 22 653
9718))
