(Updates throughout)
By Jason Hovet
PRAGUE, Oct 13 (Reuters) - Central European currencies and
stocks rallied on Monday, with Hungary's forint out in front,
after a euro zone plan to shore up the European banking sector
lifted investor sentiment towards riskier assets.
The year-old financial crisis has accelerated in the past
month and severely limited lending among banks, prompting world
governments to aid markets with a more direct hand, while
worries the problems could start spreading deeper into central
Europe have caused markets to swing widely in recent weeks.
The forint <EURHUF=> jumped 2.3 percent to 254.05 versus the
euro by 1443 GMT after heavy falls the past two sessions, while
the Polish zloty <EURPLN=> rebounded to 3.549 per euro, up 0.9
percent from Friday's domestic close.
The Czech crown <EURCZK=> added 0.6 percent to 24.72 against
the euro and Romania's leu <EURRON=> gained 0.4 percent to 3.78
per euro.
The gains came after euro zone governments announced massive
funds for banks that need extra liquidity but have been shut out
of frozen credit markets.
"A calming on financial markets was felt around the world,"
Komercni Banka currency analyst Miroslav Frayer said. "Investors
are again buying riskier assets, but it is still too early to
talk about an end to the crisis."
On Monday, economic woes prompted the IMF to offer financial
help to Hungary, while the crisis could undermine Poland's
effort to ready itself for euro adoption in 2012 and Czech
officials argued it was an incentive not to adopt the common
currency soon [].
Emerging European markets took a beating in the global
sell-off on Friday. The forint fell to a fresh two-year low, and
the currency swings were one reason Hungary's MKB Bank suspended
foreign currency loans on Monday [].
Hungary, along with Romania, has come under tougher scrutiny
from investors with its higher reliance on foreign credit and
large loan-to-deposit ratio.
STOCKS RALLY
East Europe's stock exchanges also rebounded Monday after
touching multi-year lows on Friday. The volatile Prague bourse
jumped 10.5 percent, while Warsaw's blue-chip index added 1
percent and Budapest gained 5 percent.
The region's banks have for the most part been out of the
fray in the year-old credit crunch, but signs have appeared that
they could get dragged deeper in.
The Czech Finance Ministry said on Monday it was not
planning a rescue package for the banking sector because the
country's financial institutions were healthy [].
In Poland, leaders from government and banks planned to meet
later on Monday to discuss measures needed to aid the banking
sector there, but the central bank's head said banks had ample
liquidity [].
Regional bond markets continued to be hit by a liquidity
squeeze that has kept investors on the sidelines.
Hungary put in place new measures on Friday to boost
floundering markets, including easing regulation on pension
funds and cutting back debt issues.
"At the moment any measures are only good for firefighting,"
on Budapest trader said. "It will take time for any measures to
calm down the markets."
The Czech central bank said it was looking for ways to boost
its bond market and the Finance Ministry scrapped a bond auction
for the second time this month [], while in more liquid
Poland, the market has also neared a standstill.
"There are some moves on very few sales... It is even
difficult to say the market exists," said Marcin Ziolkowski, a
dealer at Millennium Bank. "We will see how the central bank's
plan will look."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.710 24.865 +0.62% +6.74%
Polish zloty <EURPLN=> 3.549 3.581 +0.89% +1.43%
Hungarian forint <EURHUF=> 254.050 260.150 +2.34% -0.47%
Croatian kuna <EURHRK=> 7.139 7.138 -0.01% +2.56%
Romanian leu <EURRON=> 3.780 3.795 +0.40% -5.58%
Serbian dinar <EURRSD=> 81.032 80.638 -0.49% -2.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -16 basis points to 55bps over bmk*
5-yr T-bond CZ5YT=RR -15 basis points to +25bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +34bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 2 basis points to +314bps over bmk*
5-yr T-bond PL5YT=RR -13 basis points to +248bps over bmk*
10-yr T-bond PL10YT=RR -10 basis points to +213bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -51 basis points to +776bps over bmk*
5-yr T-bond HU5YT=RR -49 basis points to +742bps over bmk*
10-yr T-bond HU10YT=RR -48 basis points to +595bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1643 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)
