* Forint down on c.bank criticism of govt policy moves
* Zloty at multi-month lows, hit by euro zone crisis
* Irish deal fails to stem market concerns
(Adds Hungary's rate decision, c.bank comments)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Nov 29 (Reuters) - Hungary's forint fell more
than half a percent on Monday after the central bank governor
criticised the government's latest policy measures, unnerving
investors also wrongfooted by an unexpected rate hike.
Other currencies were mostly in negative territory on
persistent worries about possible contagion from the euro zone
debt crisis, with the Polish zloty leading losses as it sank to
multi-month lows.
Hungary's central bank (NBH) raised its base interest rate
<NBHI> to 5.5 percent on Monday after keeping it at a record low
of 5.25 percent <HUINT=ECI> for six months. Only one analyst out
of 20 polled by Reuters had expected a hike. []
At the news conference after the decision, bank governor
Andras Simor expressed concerns over indications the government
might raise the inflation target, saying the argument had
economic justification. []
"Most of the weakening was due to the spat between the
government and the central bank, also supported by this
unexpected rate hike, which has caused great unease on the
forint market," a Budapest-based dealer said.
"The market does not see assured economic or political
stability in the longer term. By tomorrow morning, the forint
can reach 285 against the euro easily. By 1551 GMT it <EURHUF=>
was 0.8 percent weaker.
Other currencies were also mostly down, with the zloty
<EURPLN=> leading losses to decline more than 1 percent to
4.079, and the Czech crown <EURCZK=> down 0.2 percent.
Only Romania's leu <EURRON=> bucked the regional trend,
rising 0.3 percent.
The euro zone's battle with debt on its periphery has hurt
central Europe's reference currency, the euro, and shone a
spotlight on the region's efforts to reassure investors over its
own fiscal position, with Hungary at the sharp end.
In Hungary, markets were spooked on Friday by planned
pension scheme changes, which will push private pension fund
members back into the state scheme. It was Hungary's
centre-right government's latest controversial policy move since
taking power this year.
The government is aiming to cut the budget deficit to below
3 percent of economic output from next year while avoiding
spending cuts of the kind other European countries are making.
"The currencies of Hungary, Poland and Romania -- all
(facing) ... an uncertain budget outlook -- are coming under
increasing pressure," Commerzbank said.
"The Czech Republic on the other hand boasts solid national
finances and as a result the (crown) is comparatively solid."
TECH PRESSURE
The zloty's break above the 4.0/euro level last week sent it
to a four-month low and broke through technical levels.
Further depreciation could put pressure on Poland's debt,
breaking thresholds that would trigger harsh spending cuts. The
currency is still seen trading around an area described as
'safe' by Polish policymakers but analysts said it was facing
more pressure. []
"The technical picture remains negative," SEB said. It said
more deterioration could prompt the finance ministry to
intervene against losses, as it did in May when the zloty moved
into the 4.17 to 4.20 range.
"It has muscle and also a strong motive to prevent further
zloty losses, since that increases foreign debt measured in PLN
and thereby increases the public debt to GDP," SEB said.
Finance ministry official Piotr Marczak told Reuters the
ministry may exchange some of the 5.6 billion euros it has at
its disposal to complete its 2010 financing needs, a comment one
trader said amounted to an "intervention" to support the zloty.
[]
RBC recommended buying the zloty against the crown on
Monday, saying a shift in the start of rate-tightening from this
year to late in the first quarter of 2011 has caused the zloty
to underperform, but that the bulk of the correction is over.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.775 24.733 -0.17% +6.23%
Polish zloty <EURPLN=> 4.079 4.028 -1.25% +0.61%
Hungarian forint <EURHUF=> 282.46 280.33 -0.75% -4.29%
Croatian kuna <EURHRK=> 7.43 7.427 -0.04% -1.63%
Romanian leu <EURRON=> 4.299 4.313 +0.33% -1.43%
Serbian dinar <EURRSD=> 106.9 106.91 +0.01% -10.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 84bps over bmk*
7-yr T-bond CZ7YT=RR +7 basis points to +79bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +98bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +375bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +363bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +336bps 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 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Dagmara Leszkowicz; Editing by Catherine Evans, John
Stonestreet)
