(Adds details, quotes)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Dec 8 (Reuters) - Central European
currencies were mixed on Monday, with Serbia's dinar boosted by
central bank action, Poland's zloty and Romania's leu sliding to
key levels, and Hungary's forint resilient to a snap rate cut.
Serbia's battered <EURRSD=> dinar jumped 2 percent on news
the central bank changed reserve requirement rules and gave
banks seven weeks to cut foreign exchange risk exposure, while
it kept its key rate unchanged at 17.75 percent [].
Hungary's central bank unexpectedly cut its main rate by 50
basis points to 10.5 percent at an extraordinary meeting,
pointing to decreasing stability risks and inflation falling
faster than expected []. But the forint <EURHUF=>
eased only briefly.
"The forint eased briefly but that was it, we're back to
where we were before the announcement," one dealer said.
"The bank has done quite a bit to prepare the market for a
rate cut. They've communicated extensively that rates have to
come down. The timing was a surprise but not the cut in itself
and the market reaction proves it."
Poland's central bank was active as well, with governor
Slawomir Skrzypek saying inflation will ease and the bank will
start focus more on growth issues [].
The zloty <EURPLN=> fell beyond the 3.9 psychological level,
as investors were concerned about economic slowdown.
"We are still in a declining trend for the zloty," said
dealer at Warsaw-based bank. "There are several reasons behind
that weakness, including the erosion in Poland's image as the
country with strong fundamentals."
The zloty has also suffered from fears that some local
exporters will now scramble to buy euros to settle losses on
hedging contracts taken to protect their earnings when the
currency was surging earlier in the year, dealers said.
In Romania, coalition talks after the Nov. 30 election
continued, with the leftist Social-Democrats and centrist
Democrat-Liberals moving closer to forming a coalition
government [].
The leu <EURRON=> fell to one-month lows against the euro to
test the psychological level of 3.88, which it failed to breach.
Some market watchers said perceived progress in inter-party
negotiations may have helped.
"Forming a government is generally seen as a positive," said
Nicolaie Alexandru-Chidesciuc, senior economist at ING Bank.
In Czech Republic, the crown <EURCZK=> weakened briefly as
the inflation data [] pointed to further cuts in
interest rates, but rebounded to trade around morning levels,
which were 0.6 percent up from Friday's domestic close.
Emerging Europe's currencies rose in early trade as global
stocks surged and investors grew more confident about buying
riskier assets.
Better sentiment in the region was also helped by U.S.
president-elect Barack Obama's announcement of an economic
recovery plan saying the country may launch the largest
infrastructure investment since the 1950s.
In fixed income markets, Hungarian and Polish bond yields
fell after the Budapest rate cut and with growing expectations
for monetary policy easing in Warsaw.
"The whole yield curve fell by 30-40 basis points after the
rate cut," one Budapest-based government bond trader said.
"Before that the market was very quiet and after the cut market
turnover rose but not very high."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.695 25.855 +0.62% +3.03%
Polish zloty <EURPLN=> 3.903 3.899 -0.1% -8.4%
Hungarian forint <EURHUF=> 263.42 266.39 +1.11% -4.18%
Croatian kuna <EURHRK=> 7.189 7.18 -0.13% +1.88%
Romanian leu <EURRON=> 3.86 3.853 -0.18% -7.82%
Serbian dinar <EURRSD=> 84.034 86.35 +2.68% -6.7%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +8 basis points to 172bps over bmk*
5-yr T-bond CZ5YT=RR -27 basis points to +141bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +126bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -10 basis points to +336bps over bmk*
5-yr T-bond PL5YT=RR -23 basis points to +278bps over bmk*
10-yr T-bond PL10YT=RR -16 basis points to +253bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -59 basis points to +753bps over bmk*
5-yr T-bond HU5YT=RR -54 basis points to +705bps over bmk*
10-yr T-bond HU10YT=RR -36 basis points to +531bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1809 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Marius Zaharia; editing by ...)
