* Hungary c.bank seen keeping interest rates flat at 6 pct
* Zloty boosted by rate hike expectations, forint lags
* Bonds little changed, mkt awaits Hungary rate decision
(Adds comments, updates markets)
By Marton Dunai
BUDAPEST, March 28 (Reuters) - The Polish zloty regained
some ground on Monday on expectations of an imminent rate hike,
while the Hungarian forint retreated from last week's 11-month
highs ahead of the new-look central bank's first rate meeting.
Currencies across the region were held back as stocks dipped
and the euro was weaker after German Chancellor Angela Merkel's
conservatives lost power in a key state. []
The zloty <EURPLN=> added 0.4 percent against the euro by
1001 GMT, recouping recent losses from a market wobble triggered
by news that imports from Germany may have been misreported and
a big revision to recent economic figures may be necessary.
The National Bank of Poland indicated it was not finished
with rate increases, but its governor said the bank would be
cautious on further steps as it saw inflation risks contained
domestically. []
Markets took that as a sign of an impending rate hike on
April 5, when analysts also expect a 25 basis point tightening.
"The zloty is supported by significant probability of a rate
hike already at the nearest sitting, and another one soon. The
market is playing on this," said a Warsaw-based FX dealer.
The Czech crown <EURCZK=> was flat. The forint <EURHUF=>
eased 0.3 percent and the Romanian leu <EURRON=> shed 0.4
percent.
The National Bank of Hungary will make its first interest
rate decision since Parliament elected four new members to the
Monetary Council, giving the governing Fidesz party's candidates
a majority over Governor Andras Simor and his two deputies.
Three of the four new rate setters will attend Monday's
meeting. Analysts expect the new council to leave borrowing
costs flat on Monday after three rate increases between November
and January took the base interest rate <NBHI> up to 6 percent
from 5.25 percent. []
Last month the bank kept the key base rate unchanged.
"Two to three months ago (with) a new fiscal package
announced, a large Eurobond issue successfully executed and the
EUR/HUF trading sub-270 we would have argued for a modest rate
cutting cycle, beginning May/June," UniCredit said in a note on
Sunday.
"The recent increase in oil and food prices, combined with
the prospect of ECB hikes, means that this is not our base case
at this stage."
However, analysts do see a chance that the revamped Monetary
Council could introduce monetary stimulus later this year to
boost lending and assist the government's pro-growth policies.
[]
"We don't expect a seismic shift (at Monday's rate
decision), but the bank's comments could divert the forint in
either direction," a Budapest-based dealer said.
INFLATION EYED
Bond yields were little changed around the region as fixed
income investors also awaited the Hungarian rate decision, a
dealer said. Hungary last week sold 3.75 billion dollars worth
of debt in the U.S. market, securing a large part of its foreign
currency financing needs for this year. []
The Hungarian central bank also publishes its quarterly
inflation report on Monday, prepared with a new methodology that
foregoes fixed interest and exchange rate assumptions.
[]
The crown has stabilised after being knocked back at the end
of last week following the Czech central bank's decision to
leave rates on hold, as some positions that had bet on a rise
were unwound.
The leu hovered just off a one-year high hit on Friday after
the central bank said recent gains reflected a stronger economy.
[]
The International Monetary Fund approved on Friday a new
precautionary aid deal for Romania worth a total of more than 5
billion euros, to be drawn on only if needed. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.538 24.532 -0.02% +1.88%
Polish zloty <EURPLN=> 3.994 4.012 +0.45% -0.9%
Hungarian forint <EURHUF=> 267 266.28 -0.27% +4.11%
Croatian kuna <EURHRK=> 7.384 7.385 +0.01% -0.05%
Romanian leu <EURRON=> 4.101 4.085 -0.39% +3.22%
Serbian dinar <EURRSD=> 103.48 103.55 +0.07% +2.36%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to -24bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +63bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +53bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +323bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +316bps over bmk*
10-yr T-bond PL10YT=RR -12 basis points to +297bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +464bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +432bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +386bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1201 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai, editing
by Catherine Evans and Susan Fenton)
