* Forint erases intraday losses after bond tenders
* Libya weighs on regional FX, euro strength helps
* Zloty eases on reduced hopes for cbank rate increase
(Corrects paragraph 1 to clarify that reform plans are due next
week and have not been announced yet)
By Radu Marinas and Sandor Peto
BUCHAREST, Feb 24 (Reuters) - The forint rose on Thursday
ahead of Hungary's announcement of reform plans next week, while
concerns over unrest in oil-producing states weighed on
currencies in the European Union's (EU) emerging markets.
The zloty fell as hopes abated that the Polish central bank
could raise interest rates next week.
A Hungarian spokesman said the government would discuss
much-awaited structural reforms on Saturday and announce the
plans on Tuesday. []
The forint extended its gains and traded at 272.90 against
the euro at 1503 GMT, firmer by half a percent from Wednesday.
Hungarian government bond yields dropped 5 basis points
after strong oversubscription at auctions []
despite the negative mood in global markets amid concerns that
unrest in Libya may spread to other oil producing countries.
The government sold 62.5 billion forints worth of bonds at
the auctions, and a further 18.5 billion forints worth of paper
at a top-up auction.
"The hopes for reforms will not let Hungarian markets down
in the next days even if international sentiment is bad," one
Budapest-based fixed income trader said.
A parliament committee is also expected to name four new
central bank (NBH) rate setters by next week before a parliament
vote on the candidates on March 7. []
The NBH Monetary Council with new members is not expected to
raise the bank's 6 percent base rate further after 3
quarter-percentage-point rate increases since November.
An NBH survey revealed on Thursday that Hungarian banks
surprised by tightening credit conditions late last year. Low
credit supply continues to hinder economic recovery.
[]
In nearby Poland, the central bank is expected to keep
interest rates on hold at its meeting next week. Rate setters
including central bank Governor Marek Belka poured cold water on
rate hike expectations in recent comments.
The zloty briefly dipped through the key psychological level
of 4.0 against the euro.
At 1503 GMT it traded at 3.985, still weaker by 0.2 percent
from Wednesday, but up from the day's lows as the euro's firming
against the dollar lent support to Central European currencies.
Polish government bond yields rose slightly.
Unlike Hungary, which fell deep into recession in the global
crisis, the Polish economy has remained robust, fuelling hopes
for zloty gains.
Some investors, however, are concerned that Poland's
unsolved fiscal problems coupled with likely monetary tightening
later this year will not help the zloty.
"Overly loose fiscal policy and tighter monetary policy lead
to a bad policy mix, which normally increases market
volatility," said Danske Bank in a note on the zloty.
The zloty has shed more than 1.5 percent against the euro
this week.
Elsewhere in the region, the Czech crown <EURCZK=> and the
Romanian leu <EURRON=> were flat against the euro, bid at 24.52
and 4.231, respectively.
Czech government bonds extended the gains posted since the
country announced pension reform plans last week. The yield on
the benchmark 2019 bond <CZ1002471=> dropped 6 basis points to a
one-month low.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.52 24.524 +0.02% +1.96%
Polish zloty <EURPLN=> 3.985 3.978 -0.18% -0.68%
Hungarian forint <EURHUF=> 272.9 274.23 +0.49% +1.86%
Croatian kuna <EURHRK=> 7.421 7.394 -0.36% -0.55%
Romanian leu <EURRON=> 4.231 4.232 +0.02% +0.05%
Serbian dinar <EURRSD=> 103.19 102.38 -0.78% +2.65%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -8 basis points to 26bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +85bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +88bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +518bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +482bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +435bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1603 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Radu Marinas; Editing
by Toby Chopra)
