* Political deadlock in Hungary, Czech Republic
* Leu bounces back after IMF-related gains
* Bonds down, tracking currencies
* Potential gains on other currencies limited by politics
(Adds quotes, detail)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, March 27 (Reuters) - Emerging European
currencies fell on Friday, led by the Polish zloty and the
Hungarian forint, as stocks dipped globally and political
uncertainty hurt the region.
Traders in Poland said the weakening of the zloty -- seen as
a proxy for the region as a whole -- was caused by a worsening
in global sentiment, exacerbated by the fall of governments in
Prague and Budapest.
U.S. stock markets also opened lower [],
signalling a worsening of global risk appetite, which had
generally improved this week.
In the Czech Republic, where Mirek Topolanek's government
resigned officially on Thursday, the main political parties said
they would push for early elections in the autumn while finding
a caretaker government until then. []
Hungary's politics were thrown into turmoil on Saturday when
Prime Minister Ferenc Gyurcsany announced he would step down and
hand over his post in a constructive vote of no confidence
sometime in early April.
The Socialists, who rule in a minority, have held talks with
the liberal Free Democrats, their only potential ally, but their
initial choices either withdrew from contention or were rejected
by the liberals.
The Free Democrats have asked the Socialists on Friday to
select former finance minister Lajos Bokros. []
In still very thin trade on Hungarian bond markets that have
been frozen for months, yields jumped 50 basis points.
"This circus about the prime minister candidates, the lack
of confidence is certainly not good," one bond trader said
By 1454 GMT, the Polish zloty <EURPLN=> fell 1.26 percent,
the Hungarian forint <EURHUF=> dipped 0.65 percent and the Czech
crown <EURCZK=> weakened 0.54 percent against the euro.
TRACKING POLITICS
Hungary was forced to reach out for IMF-led international
aid worth $25.1 billion last year to avoid a financial meltdown
and its economy is seen contracting by 4.5 percent this year.
Romania's leu <EURRON=> slipped on Friday, giving up some of
the gains made after it sealed a 20 billion euro IMF/EU aid
package on Wednesday. The deal also came with an IMF urging of
western banks to stick with investment in the country.
Late on Thursday, nine foreign owned banks operating in
Romania promised jointly to provide additional capital to their
units if needed. []
Worries over growth, financing and banks have hit countries
across the EU's eastern wing, but analysts view the Czech
Republic and Poland's economic fundamentals as stronger, making
them less vulnerable to the fallout of the global credit crunch.
Dealers said other currencies were guided by the political
situation in the Czech Republic and Hungary and could trade on
the political news stream out of Prague and Budapest.
Share moves also hit currencies, with the zloty hit by a
3.25 percent drop in the region's largest bourse <>
"There are position closings in bourses after strong rises,
we can see the impact on the region (currencies); the zloty
weakened even more than the forint," a Budapest dealer said.
Bonds market in the region were weaker with Polish markets
bracing for the finance ministry to publish its second quarter
debt supply next Tuesday, which dealers said will guide prices.
--------------------MARKET SNAPSHOT---------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.256 27.11 -0.54% -1.85%
Polish zloty <EURPLN=> 4.619 4.561 -1.26% -10.91%
Hungarian forint <EURHUF=> 303.38 301.4 -0.65% -13.13%
Croatian kuna <EURHRK=> 7.478 7.472 -0.08% -1.51%
Romanian leu <EURRON=> 4.244 4.23 -0.33% -5.41%
Serbian dinar <EURRSD=> 94.466 94.54 +0.08% -5.28%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to 235bps over bmk*
4-yr T-bond CZ4YT=RR -61 basis points to +203bps over bmk*
8-yr T-bond CZ8YT=RR -20 basis points to +303bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +22 basis points to +422bps over bmk*
5-yr T-bond PL5YT=RR +28 basis points to +347bps over bmk*
10-yr T-bond PL10YT=RR +26 basis points to +291bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +59 basis points to +1087bps over bmk*
5-yr T-bond HU5YT=RR +59 basis points to +1022bps over bmk*
10-yr T-bond HU10YT=RR +54 basis points to +876bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1654 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
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Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Marius Zaharia, Editing by Patrick Graham)
