*Czech crown retreats before cbank on Thursday
*Bonds stable, stocks gain in Prague and Warsaw
*Long zloty/crown trades in favour
(Adds details, bonds, new prices)
By Jason Hovet
PRAGUE, Aug 5 (Reuters) - The Czech crown retreated to a
3-week low on Wednesday before a central bank meeting this week
that has markets split on whether rates will be cut, while a
firmer dollar added to a cooling of central European currencies.
Investors squared positions on the crown <EURCZK=> before
Thursday's bank meeting, causing it to slip 0.4 percent as
markets remain divided on whether policymakers will continue to
ease rates or stay on hold for now.
"We are mainly seeing people squaring positions," a Prague
dealer said. "And there are still some zloty/crown trades moving
through the market that favour the zloty."
Czech bonds were stable, while Polish papers eased slightly
as investors took stock of the rising supply expected to hit
central European debt markets this autumn as deficits explode.
Polish markets awaited a 2-year bond sale later in the day.
In Romania, the leu <EURRON=> was a touch weaker on
Wednesday following a half-point interest rate cut on Tuesday.
The zloty <EURPLN=> eased to 4.107 per euro by 0919 GMT, but
stuck around its highest levels since January, while the
Hungarian forint <EURHUF=> dipped 0.1 percent.
The region's stocks bucked the trend, with gains in Prague
and Warsaw helped by banks there posting forecast-beating
profits. [] []
FAVOURING THE ZLOTY
The zloty has suffered the biggest drop in the past year
with a 21 percent fall, but also gained the most in a risk rally
last month as analysts say Poland is best positioned for a
return to moderate economic growth.
Still the Czech crown has been the only-gaining currency
this year, and dealers say many investors are taking advantage
of its outperformance.
"We prefer long zloty and short crown as we expect the
Czechs to cut rates tomorrow and we think the crown is
overvalued," said FX strategist at BNP Paribas Bartosz
Pawlowski.
"One more cut is also possible in Poland but it is not going
to happen quickly and does not affect the market situation."
Investors have booked currency profits this week after 2-4
percent gains for the zloty and forint since mid-July during a
risk rally from signs off the start of a global recovery.
Central Europe's economies have shown their first hints of a
bottom, with strong retail sales appearing in Poland and the
Czech industrial contraction slowing in June.
Analysts say central banks in the region are nearing a
bottom in their rate easing cycles, although renewed currency
strength, stubbornly poor economic data and uncertainty over the
timing of economic recovery could leave room for more rate cuts.
A Reuters poll showed 11 of 20 analysts expect the Czech
central bank to leave rates unchanged at a record low 1.5
percent this week. []
Romania's fourth cut this year brought borrowing costs to
8.5 percent, on a par with neighbouring Hungary, and the two
states carry the highest interest rates in the European Union.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.892 25.838 -0.21% +3.33%
Polish zloty <EURPLN=> 4.116 4.105 -0.27% -0.02%
Hungarian forint <EURHUF=> 266.55 266.31 -0.09% -1.13%
Croatian kuna <EURHRK=> 7.337 7.339 +0.03% +0.38%
Romanian leu <EURRON=> 4.211 4.2 -0.26% -4.67%
Serbian dinar <EURRSD=> 93.02 92.817 -0.22% -3.81%
All data taken from Reuters at 0947 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Andy Bruce)
