* FX recover slightly with euro, stocks up
* Polish bonds little moved by tightening comments
(Adds Polish bonds, quote, updates prices)
By Jason Hovet
PRAGUE, Feb 16 (Reuters) - Central European currencies
rebounded slightly with the euro on Tuesday, and the zloty led
gains on speculation in Poland about a quicker start to a
monetary tightening campaign.
Polish central bank Governor Slawomir Skrzypek said on
Tuesday the bank may need to start considering interest rate
hikes, but did not give reasons and timing. []
The market expects Polish interest rates, at a record low of
3.5 percent, to rise in the second half of the year. Most
analysts say there is no hurry as the economy is only beginning
to strengthen, while inflation is seen easing ahead.
Dealers said Skrzypek's comments added to the currency
recovery, which was mostly driven by a firming euro/dollar as
investors trimmed short positions against the currency after
Greece was given 30 days to show deficit plans are on track.
Volatility has hit central Europe's markets this month while
investors watched for a more detailed EU response to euro zone
member Greece's rising budget deficits. []
The zloty <EURPLN=> rose 0.3 percent to 4.015 to the euro by
0949 GMT. Other currencies also advanced, with the Hungarian
forint <EURHUF=> gaining 0.2 percent, while the Czech crown
<EURCZK=> and Romanian leu <EURRON=> added 0.1 percent.
Currencies mostly tracked the euro/dollar. A firmer euro
typically gives a boost to emerging Europe's currencies.
"The euro is gaining slightly; maintaining its strong
correlation with the euro/dollar, the zloty is also
strengthening slightly," a Warsaw dealer said.
"Markets are awaiting details concerning Greece. Some fear
that the lack of clear and specific arrangements may cause a
rise in risk aversion and a sell-off."
VOLATILITY
EU finance ministers were meeting in Brussels on Tuesday
following a Monday meeting of the euro zone. Investors remained
cautious on debt problems in Greece and other euro zone
periphery states, which analysts said would weigh on central
Europe even if its debt situation was in better shape.
"The Greek uncertainty in light of Eurogroup meeting may
limit the ambition of the Polish zloty," KBC said. "Hence we
think that the zloty may find it difficult to break through 4.00
EUR/PLN short-term."
Stocks in the region firmed, led by a 0.9 percent rise in
the Budapest <> and Prague <> indices.
Polish bonds were little changed after the central bank
governor's comments on policy. The prospect of higher interest
rates usually hurts government bond prices.
Investors have bid heavily for Polish debt so far this year,
mostly in auctions with shorter maturities. On Wednesday, the
finance ministry tenders papers due in 2019.
Analysts see Czech and Polish policymakers reversing
monetary easing cycles dating back to 2008 later this year.
Hungarian and Romanian central banks, on the other side, are
still expected to ease lending conditions this year after
financial turmoil last year delayed cutting interest rates.
The easing is seen giving a boost to government debt
markets. Romania sold a planned 600 million lei ($198 million)
in 6-month treasuries on Monday and yields fell. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.994 26.015 +0.08% +1.25%
Polish zloty <EURPLN=> 4.015 4.028 +0.32% +2.22%
Hungarian forint <EURHUF=> 271.54 271.97 +0.16% -0.44%
Croatian kuna <EURHRK=> 7.314 7.314 0% -0.07%
Romanian leu <EURRON=> 4.114 4.117 +0.07% +3%
Serbian dinar <EURRSD=> 98.35 98.227 -0.13% -2.51%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +13 basis points to 112bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +141bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +119bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +291bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1050 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Stephen Nisbet)
