* Zloty briefly jumps 1 pct on EU funds move
* Rest of region steady, trade thins out ahead of Easter
* Hungary sells more bonds than planned, yields roughly flat
(Updates prices, adds debt tenders, bond yields)
By Luiza Ilie and Michael Winfrey
BUCHAREST/PRAGUE, April 21 (Reuters) - Poland's zloty
<EURPLN=> jumped briefly on Monday after the Finance Ministry
said it would convert some of the 30-32 billion euros it will
receive in European Union funds through the end of 2012 in the
spot market.
Economists said this would probably lead to small market
"interventions" soon, which could push the zloty up in the near
term and potentially postpone an expected interest rate hike by
rate setters fighting persistent inflation.
But they added that the move hinted at a bigger role for the
government in what is essentially monetary policy and that
Warsaw may have made a mistake by showing its hand too early in
its efforts to keep the zloty strong. []
"The zloty skyrocketed on the news, but overall it is not
positive for the currency in a longer term, as it looks like we
are entering a managed economy," said Karol Zaluski, chief FX
dealer at ING bank in Warsaw.
The zloty rose 1 percent to 3.9450, but trimmed some of its
gains to trade at around 3.9550 at 1430 GMT. The neighbouring
Czech crown was up 0.2 percent after the president appointed two
new ministers in a cabinet reshuffle ending a cabinet row.
[]
Shares in the region narrowed their gains from earlier in
the session, led by a 1 percent rise in the Prague Stock
Exchange. Warsaw stocks <> fell after disappointing results
from the country's top telecom group TPSA <TPSA.WA>.
[]
Analysts remained upbeat on Hungary about a series of fiscal
reforms announced by the government this week designed to keep
public finances on a sustainable path.
Hungary's government debt agency sold 52.5 billion forints
($290 million) worth of bonds at auctions, above its original
plan for 45 billion forints. Yields on the three- and five-year
paper were roughly the same as two weeks ago. []
The Hungarian forint <EURHUF=> took a breather after
rallying on Wednesday as a high 6 percent interest rate and
improved risk appetite led investors to favour the currency over
the zloty.
DOUBTS OVER POLISH HIKE
Investors have rushed into high-yielding currencies, stocks
and commodities in recent days, pushing the dollar to a
three-year low against its currency basket.
But dealers expect market players to close positions and for
trading activity to slow sharply ahead of the Easter holidays,
with London and Hong Kong closed on both Friday and Monday.
Poland's March net inflation -- a measure of core inflation
closely watched by the central bank -- also rose more than
expected, but Monetary Policy Council Governor Marek Belka said
it was "not a drama", although the MPC could not ignore rising
oil and food prices. []
Analysts say that because the MPC board appears roughly
split over the timing of the next hike, it appears the decision
will fall to Belka, who also last week said the bank should not
base policy on one set of data. But traders remained cautious.
"The majority CPI increases have been driven by external
price increases therefore a potentially stronger zloty... would
be enough to slow down CPI momentum going forward," analysts at
Barclays bank wrote in an instant note.
"Although a risky assumption, the MPC will have another
reason to hold off on hikes."
Poland sold 1.03 billion zlotys in 48-week treasury bills
with the average accepted yield down from a previous tender.
[]
Elsewhere in the region, the Romanian leu <EURRON=> was flat
against the single currency. Bucharest sold less 10-year debt
than planned with the average yield unchanged at 7.4 percent,
roughly in line with expectations. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.165 24.213 +0.2% +3.46%
Polish zloty <EURPLN=> 3.952 3.965 +0.33% +0.15%
Hungarian forint <EURHUF=> 264.04 263.95 -0.03% +5.28%
Croatian kuna <EURHRK=> 7.354 7.334 -0.27% +0.35%
Romanian leu <EURRON=> 4.087 4.087 0% +3.57%
Serbian dinar <EURRSD=> 100.58 100.9 +0.32% +5.32%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +27 basis points to -12bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +45bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +67bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +316bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +309bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +282bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -13 basis points to +447bps over bmk*
5-yr T-bond HU5YT=RR -13 basis points to +418bps over bmk*
10-yr T-bond HU10YT=RR -14 basis points to +377bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1633 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; Editing by Catherine Evans)
