* Currencies recover as stocks rebound, dollar eases vs euro
* Currencies flat, watch fiscal news, Czech rate decision
(Recasts with fresh prices, comments)
By Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, Sept 18 (Reuters) - The Czech crown led a
rebound of central European currencies on Friday before next
week's Czech central bank meeting where the bank is expected to
keep interest rates on hold.
The currencies were broadly flat compared with late Thursday
levels after regaining ground lost in the morning as a rebound
equity markets and a retreat of the dollar versus the euro
helped emerging markets.
Global trends will remain key, and differences in domestic
politics, interest rate expectations and fiscal outlooks have
loosened links among central European assets, dealers said.
The Czech crown<EURCZK=> was up 0.1 percent against the euro
at 1426 GMT. The Polish zloty<EURPLN=>, the Hungarian
forint<EURHUF=> and the Romanian leu<EURRON=> were flat.
The crown has outperformed its regional peers over the past
week, gaining 1.4 percent, while the zloty has risen one percent
and the forint 0.4 percent.
Some dealers said earlier long zloty positions were closed
in favour of the crown.
"At the moment, there is a strong demand for the crown on
the market thanks to a coincidence of several factors, which are
a weakening dollar, closing long PLN/CZK position from the
beginning of summer, (and) strengthening hawkish voices from the
central bank board...," said David Sykora, a currency dealer at
CSOB.
He said the crown, which firmed to 25.06 against the euro by
1354 GMT, could soon test the next resistance level at 24.8.
The Czech central bank is expected to keep interest rates on
hold at its meeting next week.[]
BUDGETS, CENTRAL BANKS WATCHED
A delay in planned Czech elections to next year from
November has also helped the crown this week as the interim
government plans spending cuts to avoid a deficit surge.
"Everything now depends on whether the Czech politicians are
able to find the compromise about spending cuts," said Lars
Christensen, chief analyst at Danske Bank in a note.
Concerns which emerged in the past few weeks about a likely
jump in the Polish budget deficit next year has dented the
zloty's earlier status as the favourite of investors in the
region.
Polish and Hungarian bonds changed little on Friday, but
analysts said Poland's fiscal outlook could weigh on its bonds,
while Hungary's plans to cut its borrowing requirement next year
can further fuel the market after this week's big yield falls.
"Such severe changes in issuance should put upward pressure
on Poland's yield curve, while pushing Hungary's yields lower,"
Bank of America/Merrill Lynch said in a weekly note on the
region.
"These trends are likely to be enhanced by monetary policy
dynamics, as the NBH (Hungarian central bank) will likely keep
cutting rates in 2010, while the NBP (Polish central bank) will
likely start a tightening cycle next year," it added.
A Hungarian fixed income trader said Hungarian bond yields
which traded at 7.5-7.8 percent on Friday could find support at
7.9-8.0 percent even if global equity markets fall next week.
Hungarian financial markets have priced in NBH rate cuts
worth about 300 basis points for the next six months from 8
percent, and these forecasts support government debt, while
putting risks on the forint<EURHUF=>, dealers said.
The forint was flat at 271.01 against the euro. "I can't see
a direction, it should remain stuck between 270 and 275 in the
short term," one Budapest-based dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.08 25.099 +0.08% +6.67%
Polish zloty <EURPLN=> 4.126 4.125 -0.02% -0.27%
Hungarian forint <EURHUF=> 271.01 270.96 -0.02% -2.75%
Croatian kuna <EURHRK=> 7.289 7.28 -0.12% +1.04%
Romanian leu <EURRON=> 4.258 4.259 +0.02% -5.72%
Serbian dinar <EURRSD=> 93.21 93.37 +0.17% -4%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +11 basis points to 201bps over bmk*
7-yr T-bond CZ7YT=RR +18 basis points to +192bps over bmk*
10-yr T-bond CZ10YT=RR -12 basis points to +172bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR N/A basis points to +373bps over bmk*
5-yr T-bond PL5YT=RR N/A basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR N/A basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +594bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +525bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +444bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1626 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto; Editing
by Andy Bruce and Toby Chopra)
