* Zloty jumps as CPI rise reinforces rate hike expectation
* Forint shrugs off CPI fall, awaits reforms, c.bank revamp
* FX touch stronger on euro firming
(Recasts with Polish inflation, new comments, prices)
Dagmara Leszkowicz and Sandor Peto
WARSAW/BUDAPEST, Feb 15 (Reuters) - The zloty surged against
the euro on Tuesday as higher-than-expected January Polish
inflation figures reinvigorated expectations for interest rate
increases by the Polish central bank in the next months.
The forint, meanwhile, shrugged off a fall in Hungarian
inflation, which stifled remaining expectations for a National
Bank of Hungary (NBH) rate increase next week.
The zloty <EURPLN=> firmed 0.8 percent against the euro by
1451 GMT to 3.916, while the forint <EURHUF=> firmed 0.6 percent
to 270.57. The Czech crown <EURCZK=> was flat at 24.316 and
Romania's leu <EURRON=> shed 0.2 percent to 4.254.
The Polish unit posted most of its gains after data showed
that annual inflation jumped to a 21-month high of 3.8 percent
in January from 3.1 percent in December.
"No one had expected such a jump (in inflation)," one
Warsaw-based dealer said. "The market is likely to return to its
previous scenario of (expected) quick interest rate increases."
Polish government bonds fell after the figures, with yields
rising 7-8 basis points.
"This data will definitely increase market expectations for
a March (central bank interest rate) hike," said Piotr Bielski,
senior economist at Bank Zachodni WBK.
RECOVERY VS INFLATION
Economic recovery and rising food and energy prices are
generating inflation pressure in many emerging markets, pushing
central banks towards monetary tightening, and the pace and
scope of rate hikes is key information to currency and bond
investors.
Hungary's annual inflation slowed to 4.0 percent in January,
below analysts' 4.3 percent forecast and December inflation at
4.7 percent.
The forint firmed despite the figures, while Hungarian
government bond yields fell by 5-9 basis points.
"In theory the inflation figures should have weakened the
forint," one Budapest-based dealer said. "But I don't think that
rate hike expectations had been very strong. On the other hand
GDP (gross domestic product) figures were good."
Annual GDP growth picked up to 2 percent in the fourth
quarter of 2010 from 1.7 percent in the third quarter, exceeding
market expectations.
Dealers, however, said the forint and government bonds could
remain rangebound or track changes in risk appetite in Europe in
the short term.
"The direction will depend on the government (reform)
measures to be announced by March... and the changes in the
central bank," one fixed income trader said.
Parliament is expected to amend the central bank law in the
next two weeks to allow a committee -- on which the ruling
Fidesz party has a majority -- to nominate all four new NBH rate
setters to replace officials whose mandate will end on March 1.
Apart from the Polish data, economic figures in emerging
Europe did not underpin concerns over a pick-up in demand-led
inflation pressure or hopes for quick economic recovery.
[]
The Czech economy grew by 2.9 percent in the fourth quarter
on an annual basis, but its 0.5 percent quarter-on-quarter
growth was below analysts' 0.8 percent forecast.
Romania's economy shrank by 0.6 percent in annual terms in
the fourth quarter, much less than the forecast 1.5 percent, and
gained 0.1 percent on the third quarter.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.316 24.307 -0.04% +2.81%
Polish zloty <EURPLN=> 3.916 3.947 +0.79% +1.07%
Hungarian forint <EURHUF=> 270.57 272.05 +0.55% +2.74%
Croatian kuna <EURHRK=> 7.402 7.41 +0.11% -0.3%
Romanian leu <EURRON=> 4.254 4.245 -0.21% -0.49%
Serbian dinar <EURRSD=> 103.31 103.3 -0.01% +2.53%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +18 basis points to 47bps over bmk*
7-yr T-bond CZ7YT=RR +12 basis points to +81bps over bmk*
10-yr T-bond CZ9YT=RR +7 basis points to +83bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +514bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +475bps over bmk*
10-yr T-bond HU10YT=RR -6 basis points to +415bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Dagmara Leszkowicz;
editing by Stephen Nisbet)
