* Zloty touches new 13-month high
* More gains seen for CEE currencies
* Hungary short-dated bonds extend gains after rate cut
(Adds Hungary bonds, quote, stock prices)
By Jason Hovet
PRAGUE, Feb 23 (Reuters) - Poland's zloty hit a 13-month
high on Tuesday as central European currencies steadied close to
recent peaks, threatening to break through technical ranges on
the back of the region's relatively bright fiscal outlook.
The Polish unit is expected to lead gains in central
European this year as an export revival boosts local currencies.
The zloty <EURPLN=> briefly broke below 3.95 to the euro
early in the session, before pulling back 0.1 percent on the day
to bid at 3.966 by 1052 GMT. <CEEFXPOLL01>
Hungary's forint <EURHUF=> led with a 0.2 percent rise to
the strong side of 270, holding onto overnight gains and trading
near its highest level this month.
The Czech crown <EURCZK=> dipped 0.1 percent from Monday's
local close, just off a two-month high hit last week. The
Romanian leu <EURRON=> was steady.
"(Currencies) are getting out of technical ranges ... that
we've been locked in for ages," a Prague dealer said. "The
euro/dollar is also higher, so there is a possibility for
(gains)."
Regional bourse indices <> <> <> fell up to 1
percent.
Market volatility caused by investor concern over Greece's
budget deficits have knocked emerging European assets this
month. Currencies, though, have held firming paths since the
start of the year, led by a 3.5 percent rise for the zloty.
The euro, central Europe's reference currency which often
charts the region's direction, has been under pressure on
account of Greece's rising budget deficits.
Analysts say central Europe's fiscal position is stronger
than that of euro zone periphery countries. This has held losses
for the region in check this month during times of risk
aversion.
"If the Greek issue is put aside for some time, we may see
the (EUR/PLN) pair to break further below 4.00 EUR/PLN," KBC
said. "In that case the space for short-term rally may open
pretty fast.
RATE OUTLOOKS
Central European markets will look to the start of a two-day
Polish central bank Monetary Policy Council meeting on Tuesday,
with a no change decision on interest rates seen on Wednesday.
Polish and Czech policymakers will likely start raising
rates, now at all-time lows, in the second half of the year.
Hungary's central bank cut its key rate by 25 basis points
to a record low of 5.75 percent as expected on Monday but said
room for further easing has narrowed given the uncertainties in
global markets. []
Short- and medium-dated Hungarian bond yields extended gains
on Tuesday, with the 3-year bond yield at its lowest since
December. Analysts and dealers were split over whether another
interest rate cut was on the cards.
"I think yields are very close to their local support
already," one trader said. "I don't think that there will be any
more rate cut."
U.S. Federal Reserve chief Ben Bernanke gives testimony to
Congress on Wednesday and Thursday and investors are looking to
see if he will hose down talk of early monetary tightening.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.741 25.725 -0.06% +2.24%
Polish zloty <EURPLN=> 3.966 3.96 -0.15% +3.48%
Hungarian forint <EURHUF=> 269.64 270.3 +0.24% +0.26%
Croatian kuna <EURHRK=> 7.292 7.292 0% +0.24%
Romanian leu <EURRON=> 4.114 4.116 +0.05% +3%
Serbian dinar <EURRSD=> 99.25 98.95 -0.3% -3.4%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +4 basis points to 85bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +122bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +102bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +391bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +323bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +282bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +539bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +491bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +446bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1154 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Robin Pomeroy)
