* Leu falls on c.banker comments, zloty strong before c.bank
* Polish markets await clues on likely tightening this year
* Polish bonds touch weaker before debt supply
(Adds bonds, updates prices)
By Jason Hovet
PRAGUE, March 31 (Reuters) - Romania's leu hit a 1-1/2 week
low on Wednesday after a central banker said fundamentals did
not justify further appreciation, while the Polish zloty gained
ahead of the central bank's monthly policy decision.
Polish policymakers are widely expected to hold interest
rates at a record low 3.5 percent, but markets are watching
Wednesday's statement and news conference for signs they may
delay tightening policy more than previously thought.
Weak inflation and currency strength in central Europe
helped Romania and Hungary cut interest rates to new lows this
week, while the Czechs signalled last week that a rate cut was
still an option, pushing back market expectations of hikes later
this year.
Romania's central bank decided unanimously to cut interest
rates by 50 basis points on Monday, deputy Governor Cristian
Popa told reporters on Tuesday, a rarely released detail
analysts said likely heralded further easing. []
On Wednesday he was quoted as saying that Romania's current
economic fundamentals do not justify further firming of the leu.
[]
The leu <EURRON=> fell 0.4 percent on the day to 4.09 to the
euro by 0926 GMT, its lowest since the start of last week.
"It's verbal intervention," one trader in Bucharest said.
"There is pressure (from the belief) that it might be followed
by actual intervention."
Dealers said the central bank helped knock the leu off
14-month highs last week, and say the bank intervened last year
to check weakening. The central bank has always declined to
comment.
ZLOTY BREAKS AWAY
Polish bonds weakened on Wednesday, with dealers saying some
investors were adjusting portfolios before the release of debt
supply details later in the day.
The zloty <EURPLN=> added 0.4 percent to 3.86 per euro,
edging back toward a 15-month peak it touched this month and
dealers said further appreciation was likely.
"Sentiment for the zloty is good. Money is coming in from
abroad and there are chances the zloty will continue to
strengthen," BRE Bank dealer Andrzej Bowtruczuk said.
Elsewhere, the Czech crown <EURCZK=> and Hungarian forint
<EURHUF=> trod water. Hungarian bonds were steady with yields on
the 3-year bond around almost 5-year lows and near 2-1/2 year
lows on the 10-year. The central bank there has left space open
for more monetary easing, which could boost bonds.
The forint also hit its highest level since the turn of
2008/2009 this month, but has retreated around 2 percent since
then, while the zloty is only 0.1 percent off its high.
Strategists expect the zloty to outperform peers, which are
expected to gain on an export recovery. But analysts warn the
path will be choppy with worries persisting in markets over
Greece's and other euro zone peripheral countries' debt.
Hungarian and Czech elections this spring will also weigh
until new governments are formed and markets assess their
strength and policies.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.445 25.439 -0.02% +3.43%
Polish zloty <EURPLN=> 3.86 3.874 +0.36% +6.32%
Hungarian forint <EURHUF=> 266.42 266.62 +0.08% +1.48%
Croatian kuna <EURHRK=> 7.26 7.26 0% +0.68%
Romanian leu <EURRON=> 4.09 4.072 -0.44% +3.6%
Serbian dinar <EURRSD=> 99.65 99.763 +0.11% -3.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +14 basis points to 76bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +102bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +94bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +364bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +303bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +244bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +470bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +413bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +379bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1127 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Ruth Pitchford)
