* FX hit on fears austerity could slow recovery
* Czech crown falls after c/a data shows deficit
* Foreign investment in Romania, Bulgaria falls
(Adds detail on forex, current account)
By Dagmara Leszkowicz and Sam Cage
WARSAW/BUCHAREST, May 17 (Reuters) - Emerging Europe's
currencies fell on Monday, hit by concerns over a rescue package
for indebted euro zone countries which could hurt the region's
nascent economic recovery.
Central and eastern European currencies tend to be linked to
moves in the euro, which plummeted to a four-year low against
the dollar <EUR=> on fears austerity measures would crimp
recovery, dealers said.
Emerging European economies are seen as particularly
vulnerable because their are heavily dependent on demand from
western Europe.
"The correlation with euro/dollar is very high and has
increased significantly," said Unicredit economist Gyula Toth.
German Chancellor Angela Merkel said on Sunday that a $1
trillion EU rescue plan had only bought the euro zone time to
tackle its fundamental problem, a widening gap between its
strongest and weakest economies. []
The CEE region's currencies have lost far less than the
common currency this month and analysts say they still hold
value due to the region's lower debt levels and higher growth
potential.
Hungary's forint was the biggest loser, falling 0.5 percent
against the euro <EURHUF=> by 1344 GMT. The Polish zloty edged
up 0.2 percent <EURPLN=>.
"The euro is getting smashed... and so are we," said one
Warsaw-based dealer. "It looks like the market is starting to
think that Europe is getting less capable of handling its own
problems."
LESS FOREIGN INVESTMENT
Foreign direct investment (FDI) shrank in Romania and
neighbouring Bulgaria in the first quarter, data showed on
Monday, potentially harming recovery prospects for the European
Union's poorest emerging economies. []
Romania's leu <EURRON=> fell 0.2 percent against the euro
after a central banker said he saw no need for short-term
reversal in the interest rate reducing cycle.
Dealers said the negative impact was limited as they
suspected the central bank had been intervening both ways to
keep the leu in a 4.1-4.2 range against the common currency.
The central bank has declined to comment on the issue, but
repeatedly signalled it did not like the leu's volatility.
The Czech crown <EURCZK=> was down 0.1 percent against the
euro, trimming previous gains after current account data showed
a surprise deficit due to foreign-owned companies' dividend
payments. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.516 25.501 -0.06% +3.14%
Polish zloty <EURPLN=> 4.008 4.015 +0.17% +2.4%
Hungarian forint <EURHUF=> 277.49 276.19 -0.47% -2.57%
Croatian kuna <EURHRK=> 7.253 7.253 0% +0.77%
Romanian leu <EURRON=> 4.192 4.185 -0.17% +1.08%
Serbian dinar <EURRSD=> 100.5 100.05 -0.45% -4.6%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 124bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +97bps over bmk*
10-yr T-bond CZ10YT=RR +4 basis points to +130bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +394bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +347bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +279bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -12 basis points to +540bps over bmk*
5-yr T-bond HU5YT=RR -14 basis points to +503bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +421bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1544 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; editing by John Stonestreet)
