(Updates throughout, changes dateline.)
BUDAPEST, Aug 28 (Reuters) - Central European currencies
extended their losses against the euro on Thursday as concerns
over a slowdown in economic growth and the Russian-Georgian
conflict dented sentiment.
Dealers said the dollar's moves would remain a key factor,
and the U.S. unit eased during most of the Central European
session but rebounded during late trade, weighing on currencies
in the region.
Hungary's forint <EURHUF=> led the losses, shedding 0.74
percent by 1445 GMT, to trade at 238.31 against the euro, and
Hungarian government bond prices tracked the currency lower.
Dealers said the forint can extend losses and ease towards
240 after passing a key technical level at 237.50.
While trade remained sluggish, the forint weakened partly
due to concerns that a tax cut plan announced by the minority
government on Wednesday will not get parliament backing and lead
to the resignation of Prime Minister Ferenc Gyurcsany.
Gyurcsany's Socialist party needs the support of the liberal
party Free Democrats (SZDSZ) for the tax bill to pass.
"Foreign investors are probably more sensitive to news
concerning (Gyurcsany's) resignation, but we know that SZDSZ has
already forged compromises so as to avoid early elections," said
Takarekbank in its daily note on Hungarian markets.
"If the party's week-end meeting gives the green light to
the prime minister's programme, that could calm nerves and the
forint could correct (firm)."
The Czech crown <EURCZK=> eased 0.1 percent to 24.68 versus
the euro and dealers said it was slowly moving towards 25.0.
"The main factor (for the continued weakening) has been the
stronger dollar," one dealer in Prague said. "The situation in
Russia doesn't help. Also central European economies are slowing
down. It's been a mixture of factors."
The weakening crown helped push rates on interest rate swaps
(IRS) and forward-rate agreements higher, with the 2-year IRS
adding 7 basis points as chances diminished of another central
bank rate reduction to follow this month's surprise cut.
"It's a bit of a correction now," another trader said. "A
rate cut is still priced in, but chances are decreasing (with
the weaker crown)."
Poland's zloty also eased, though it was stable for most of
the day, and dealers said the next key input for the currency
would be the publication of second-quarter economic growth data
early on Friday.
Polish bonds lost ground following a raft of comments from
central bankers suggesting at least one more rate rise was on
the cards. Markets saw Wednesday's statement from the Monetary
Policy Council as a whole as having taken a similar tone.
"The market is seeking stabilisation after hawkish comments
from Monetary Policy Council members," said Maciej Slomka,
dealer at Pekao bank in Warsaw.
************************MARKET SNAPSHOT*********************
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.68 24.66 -0.08% +6.86%
Polish zloty <EURPLN=> 3.351 3.34 -0.33% +6.93%
Hungarian forint <EURHUF=> 238.31 236.55 -0.74% +5.75%
Croatian kuna <EURHRK=> 7.154 7.16 +0.08% +2.35%
Romanian leu <EURRON=> 3.535 3.54 +0.14% +1.26%
Serbian dinar <EURRSD=> 76 76.22 +0.29% +3.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -4 basis points to -6bps over bmk*
5-yr T-bond CZ5YT=RR -4 basis points to +3bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +33bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +212bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +199bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +185bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +473bps over bmk*
5-yr T-bond HU5YT=RR +8 basis points to +441bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +369bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1645 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters buros, writing by Sandor Peto, editing
by Patrick Graham)
