* Poland seen raising rates to 3.75 pct on Wed
* Analysts factor in pause in Hungary tightening cycle
* Romania sells debt at lower yields
(Updates throughout)
By Gergely Szakacs and Dagmara Leszkowicz
BUDAPEST/WARSAW, Jan 17 (Reuters) - Central European
currencies were mostly stronger in a thin trade on Monday and
analysts say regional units may continue strengthening in the
coming days as Poland is widely expected to raise interest rates
on Wednesday.
Markets expect Poland on Wednesday to become the second
emerging European country to start monetary tightening and keep
inflation in check, following Hungary which began raising rates
in November.
A Reuters poll showed 19 of 29 analysts expect the Polish
central bank to raise its key interest rate by 25 basis points
on Wednesday, from a record low 3.5 percent. []
"I expect the zloty to remain in a range of 3.83-3.93, but
if the statement following the decision is hawkish, the unit
should strengthen below the lower band (of the range)," said one
Warsaw-based dealer.
A currency dealer in Budapest said a rate rise in Warsaw
could also boost the Hungarian forint <EURHUF=>, which generally
benefits from gains in the Polish currency.
"We're in for a quiet day as there is no U.S. market," the
dealer said. "In the near term, the forint can be influenced by
the Polish rate decision. If the zloty gains, the forint can
follow suit."
Hungary's central bank meets next Monday to discuss policy
and analysts are beginning to factor in the possibility it may
pause after raising rates by a combined 50 basis points to 5.75
percent <NBHI> over the past two months.
Central bank Deputy Governor Ferenc Karvalits told Reuters
on Friday that the bank could move slowly with its cycle of
monetary tightening, possibly pausing for one or two months
between rate hikes. []
"We expect the central bank to stand still in January and
observe further inflation developments," Commerzbank wrote.
By 1501 GMT the Polish zloty <EURPLN=>, seen as the region's
best performer this year, was flat, traded at 3.868.
The forint <EURHUF=> was 0.5 percent stronger, while the
Czech crown <EURCZK=> added some 0.3 percent. The Romanian leu
<EURRON=> was up 0.1 percent.
Czech industrial producer prices rose 1.0 percent
month-on-month in December and 3.6 percent year-on-year, above
market expectations, data showed on Monday. However, analysts
said the data would not change interest rate expectations.
[]
ROMANIA SELLS DEBT
In Romania the ministry sold two and half fold as much
one-year debt as planned in a tender on Monday at lower yields
with analysts attributing such a strong result to an improving
political stability and IMF-aided efforts to reing in a vast
fiscal deficit. []
Appetite for Romanian debt has picked up since November,
whenthe country's debt managers scrapped an unproductive
strategy of capping yields at 7 percent.
Elsewhere, the Polish bonds were a touch stronger, with
yields on the longer-end of the curve some 5 basis points lower
but dealers say the market follows a rebound on the German bunds
and the possible rise in interest rates is already priced in.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.288 24.365 +0.32% +2.93%
Polish zloty <EURPLN=> 3.868 3.869 +0.03% +2.33%
Hungarian forint <EURHUF=> 274.13 275.43 +0.47% +1.4%
Croatian kuna <EURHRK=> 7.392 7.395 +0.04% -0.16%
Romanian leu <EURRON=> 4.255 4.26 +0.12% -0.52%
Serbian dinar <EURRSD=> 104.25 105.05 +0.77% +1.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 61bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +86bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +93bps over bmk*
Polish treasury bonds <0#PLBMK=>
#VALUE!
5-yr T-bond PL5YT=RR +2 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +328bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -8 basis points to +604bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +554bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +477bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1601 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Gergely Szakacs;
Editing by Susan Fenton and Toby Chopra)
