(Updates throughout, changes dateline)
BUDAPEST, Oct 6 (Reuters) - Serbia's central bank stepped in
to support the dinar on Monday while dealers reported Romania
may have done so indirectly as the credit crisis drove central
Europe's high-yielding currencies lower for a third day.
Losses were led by a 2.64 percent slide for Hungary's forint
<EURHUF=> against the euro that brought its losses since late
last week to around 3.5 percent.
The dinar<EURRSD=>, Poland's zloty<EURPLN=> and Romania's
leu <EURRON=> all lost around another two percent as investors
cut back positions in traditionally higher-risk, higher-return
markets, in favour of holding cash in major currencies.
"You see total risk aversion in every field," said one
dealer in Budapest, asking not to be named.
"If euro is bought from a bank (for forints) it immediately
tries to cover the positions, and the fall rolls further."
Investors are looking at the U.S. Federal Reserve, the
European Central Bank and the region's monetary authorities,
whether they loosen monetary conditions to ease the liquidity
crunch and counter a slowdown in economic growth, dealers said.
In the northern outskirts of Europe, the crown of Iceland,
another emerging market, plummeted 23 percent on the day,
unnerving investors across the sector.
In Central Europe, Serbia's central bank sold 40 million
euros in the market in a move to tame the dinar's losses.
Romania's leu bounced back to 3.94, helped by sales of euro
by a large local bank, which dealers said could have been making
deals on behalf of the central bank in an indirect intervention.
An advisor to the central bank declined to comment. The
bank's governor Mugur Isarescu said later that the Romanian
banking system was stable.
"But... we are ready to ensure liquidity if the Romanian
banking system needs additional liquidity," he said.
Hungary's forint fell more than its regional peers as it
crossed a key psychological level at 250 against the euro.
Hungarian government bonds also slumped, tracking the
forint's fall as investors defended positions in asset swaps,
where cash is not needed, keeping those yields well below the
curve of the bond market where liquidity has dried out.
Foreign investors also shunned Slovakia's 3-year government
bond auctions, while Polish government papers weathered the
storm relatively well.
"The difference is that the Polish market is shielded by
their euro zone entry story (expectations that Poland will join
the euro zone in a few years)," one Budapest-based trader said.
"The fresh hope in the (Hungarian) market now is that the
European Central Bank will slash interest rates and that will
push the NBH (National Bank of Hungary) into cuts, too," another
trader said.
"But, frankly, it's difficult to imagine how the NBH will
cut, with the yield curve at above 10 percent."
Dealers in Warsaw said the zloty, which traded at 3.465 to
the euro at 1407 GMT, may weaken to 3.5 in the short term.
"The (global financial) crisis is likely to continue, but
the zloty is likely to strengthen (in the longer term) mainly
due to a possible euro adoption," said dealer at BRE bank Pawel
Bialczynski.
The Czech crown <EURCZK=> was flat, outperforming the
region as it was helped by demand from exporters coming at
around the 24.90 level, but dealers were not optimistic.
"The crown is partially being protected by corporates," a
Prague-based trader said, but added it was pressed by the
regional moves. "Investors I think are waiting for one single
piece of bad news so they can move the rate beyond 25."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.771 24.785 +0.06% +6.51%
Polish zloty <EURPLN=> 3.465 3.395 -2.06% +3.76%
Hungarian forint <EURHUF=> 250.540 244.100 -2.64% +0.91%
Croatian kuna <EURHRK=> 7.121 7.116 -0.07% +2.8%
Romanian leu <EURRON=> 3.950 3.875 -1.94% -10.33%
Serbian dinar <EURRSD=> 79.160 77.468 -2.18% -0.51%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +18 basis points to 40bps over bmk*
5-yr T-bond CZ5YT=RR +10 basis points to +25bps over bmk*
10-yr T-bond CZ9YT=RR +20 basis points to +32bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +20 basis points to +304bps over bmk*
5-yr T-bond PL5YT=RR +17 basis points to +254bps over bmk*
10-yr T-bond PL10YT=RR +16 basis points to +205bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +60 basis points to +696bps over bmk*
5-yr T-bond HU5YT=RR +82 basis points to +658bps over bmk*
10-yr T-bond HU10YT=RR +56 basis points to +496bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1607 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)
