(Recasts lead, adds new Hungarian central bank facility 5-7,
fresh prices throughout.)
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, Feb 5 (Reuters) - The forint and Czech
crown led central European currencies higher on Thursday
following a Czech interest rate cut, but dealers said the region
was expected to stay under pressure due to a dismal economic
outlook and poor investor sentiment.
The Czech central bank cut interest rates by 50 basis points
to 1.75 percent [] and predicted the country would
slide into recession this year for the first time in a decade.
The Czech crown <EURCZK=> jumped 1.3 percent after the
central bank issued an exchange rate forecast for the first time
predicting the crown averaging 25.8 to the euro in 2009, much
stronger than current levels. It traded at 27.925 at 1636 GMT,
firmer by 1.22 percent from Wednesday.
The forint <EURHUF=> surged 1.5 percent after the central
bank (NBH) said that it would launch six-month euro/forint fx
swap tenders to improve the euro liquidity of commercial banks,
which had been cut by the global financial crisis.[]
At 1636 GMT it traded at 292.12 against the euro, well off a
record low of 304 hit on Wednesday, and market participants said
the new NBH facility helped the forint as it could cut
commercial banks' demand for euro in the spot market.
"But longer-term trends will obviously hinge on other
factors, like fundamentals, internal and external balance and
risk appetite," said Gabor Dunai of OTP Bank Research.
The zloty <EURPLN=> firmed 0.48 percent to 4.629 per euro,
after a series of sell-off sessions, but the outlook remains
grim with possible attack on 4.70 against the euro.
"Looking at what happened, further weakening is still
likely, with an attack on 4.70 against the euro. There are no
signals that the trend has reversed," an FX dealer at Warsaw
bank said.
Other dealers also said the odds were pointing towards a
renewed weakening of the region's currencies and bonds.
"Sentiment is still bad ... we tested these higher levels
but it does not mean that downward pressure has disappeared," a
Budapest-based fixed income trader said.
Polish bonds weakened in thin turnover as risk aversion
mounts and the government's euro-adoption plans are being
delayed.
"Bond prices dropped after declarations that our path to the
euro might be longer than expected, also zloty weakening and
risk aversion are taking their toll," Maciej Slomka, head of
bond dealers at Pekao bank said.
A hawkish member of Poland's central bank called for a
slowdown in interest rate cuts due to the zloty's slide, and a
moderate member said the zloty's recent weakening may impact the
bank's decision on rates in February. []
Poland's central bank has slashed borrowing costs by a total
of 175 basis points since November to 4.25 percent, and the
central bank's Governor Slawomir Skrzypek said further rate cuts
would not be ruled out. []
The Romanian leu <EURRON=> firmed 1.0 percent to 4.258 after
Wednesday's central bank measure, the first cut in 19 months,
and dealers also suspected indirect central bank intervention to
support the unit. []
The region's currencies often firmed in the past months
after rate cuts which can help mitigate economic growth
problems, but at times of rising risk aversion the currencies
have continued to weaken.
Before the Czech rate cut, Czech data showed a worse than
expected trade deficit in December, which analysts said will
weigh on the crown. []
"The (Czech trade) number... confirms the (poor) situation
for exporters, which has already been shown in the drop in
foreign orders," said David Navratil, an economist with Ceska
Sporitelna bank.
Hungarian bond yields rose further, with the three-year bond
trading well above 11 percent.
The European Central Bank held interest rates steady at 2.0
percent on Thursday as expected. []
Hungary's Government Debt Agency (AKK) is expected to decide
later on Thursday whether to hold a government bond auction in
mid February. The AKK suspended regular bond tenders in October
when the local market froze up due to a lack of demand.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.925 28.265 +1.22% -4.2%
Polish zloty <EURPLN=> 4.629 4.651 +0.48% -11.1%
Hungarian forint <EURHUF=> 292.12 296.5 +1.5% -9.78%
Croatian kuna <EURHRK=> 7.403 7.405 +0.03% -0.51%
Romanian leu <EURRON=> 4.244 4.302 +1.37% -5.41%
Serbian dinar <EURRSD=> 91.879 92.737 +0.93% -2.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +23 basis points to 142bps over bmk*
4-yr T-bond CZ4YT=RR +14 basis points to +136bps over bmk*
8-yr T-bond CZ8YT=RR +8 basis points to +124bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +377bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +302bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +248bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +8 basis points to +946bps over bmk*
5-yr T-bond HU5YT=RR +10 basis points to +892bps over bmk*
10-yr T-bond HU10YT=RR +14 basis points to +686bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1736 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Writing by Jason Hovet/Sandor
Peto/Krisztina Than; Editing by Ruth Pitchford and Toby Chopra)
