* Zloty boosted by rate hike expectations
* Hungary c.bank keeps rates unchanged as expected
* Crown stable, leu off peak
(Updates after Hungary cbank)
By Marton Dunai and Jason Hovet
BUDAPEST/PRAGUE, March 28 (Reuters) - The Hungarian forint
retreated from 11-month highs on Monday after the central bank
left interest rates unchanged as expected, while Poland's zloty
regained some ground on expectations it may hike rates soon.
The Hungarian central bank's Monetary Council met for the
first time since Parliament appointed four new members to it,
putting the governing Fidesz party's picks in the majority over
Governor Andras Simor -- whom the party has criticised
repeatedly -- and his two deputies.
Analysts had expected the council to leave borrowing costs
flat on Monday, holding fire for a second month after a combined
75 basis points of tightening around the turn of the year that
brought the base rate to 6 percent. []
There was no indication that the council would rush to turn
back the bank's rate hikes, which have also been heavily
criticised by the government. Three of the four new rate setters
were expected to have attended Monday's meeting.
The bank will hold a press conference on the decision at
1300 GMT.
The forint <EURHUF=> lost 0.3 percent to 267.05 to the euro
by 1224 GMT, mostly steady after the decision.
"We do not expect any extreme and sudden dovish moves,
however, as the new members are well aware of market risks,"
said Gyorgy Barta of CIB Bank.
"Risks point to rates remaining on hold, with the MPC
adopting a wait-and-see stance in the coming months."
Emerging European currencies were held back as stocks mostly
dipped and the euro weakened against the dollar after German
Chancellor Angela Merkel's conservatives lost power in a key
state. []
Currencies often track the euro/dollar cross. But the zloty
<EURPLN=> added 0.4 percent against the euro, recouping recent
losses from a market wobble triggered by news that imports from
Germany may have been misreported and a big revision to recent
economic figures may be necessary.
The National Bank of Poland indicated it was not finished
with rate hikes, but its governor said the bank would be
cautious on further steps as it saw inflation risks as contained
domestically. []
Markets took that as a sign of an impending rate hike on
April 5, when analysts also expect a 25 basis point tightening.
"The zloty is supported by the significant probability of a
rate hike already at the nearest sitting, and another one soon.
The market is playing on this," said a Warsaw-based FX dealer.
OTHER FX MIXED
The Czech crown <EURCZK=> was flat and the Romanian leu
<EURRON=> shed 0.6 percent on profit-taking, dropping from a
one-year high hit last week when the central bank said recent
gains reflected a stronger economy. []
The crown also stabilised after being knocked back last week
following the Czech central bank's decision to leave rates on
hold, as some positions that had bet on a rise were unwound.
In Hungary, most analysts expect the bank to keep rates on
hold until the end of the year. The central bank also publishes
its quarterly inflation report on Monday, prepared with a new
methodology that forgoes fixed interest and exchange rate
assumptions. []
"Two to three months ago (with) a new fiscal package
announced, a large Eurobond issue successfully executed and the
EUR/HUF trading sub-270 we would have argued for a modest rate
cutting cycle, beginning May/June," UniCredit said in a note.
"The recent increase in oil and food prices, combined with
the prospect of ECB hikes, means that this is not our base case
at this stage."
However, analysts see a chance the revamped council could
introduce monetary stimulus later this year to boost lending and
assist the government's pro-growth policies. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.533 24.532 0% +1.9%
Polish zloty <EURPLN=> 3.998 4.012 +0.35% -1%
Hungarian forint <EURHUF=> 267.05 266.28 -0.29% +4.09%
Croatian kuna <EURHRK=> 7.389 7.385 -0.05% -0.12%
Romanian leu <EURRON=> 4.109 4.085 -0.58% +3.02%
Serbian dinar <EURRSD=> 103.45 103.55 +0.1% +2.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 3bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +64bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +67bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1425 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai and
Jason Hovet, editing by Catherine Evans and Susan Fenton)
