(Releads with leu fall, adds details, analyst quotes)
By Marius Zaharia
BUCHAREST, Oct 27 (Reuters) - Romania's leu dived on Monday
after Standard & Poor's downgraded the country's foreign debt to
junk, while Hungary's forint outperformed the region, helped by
an IMF rescue deal and news of a Daimler investment.
The leu <EURRON=> and the forint <EURHUF=> have been the
region's most battered currencies in recent weeks because of
high external vulnerabilities in both economies.
The leu fell as low as 3.7677 against the euro, or 2
percent, in half an hour after S&P's decision [],
from 3.6903 before the announcement. It later recovered some of
the loss on profit taking in very thin trade, dealers said.
"The leu fell fast because of the downgrade and who knows
how much it can fall," said a dealer with a Bucharest bank.
"There will be depreciating pressure all week."
Hungary's forint regained part of last week's losses,
boosted by a broad IMF and European Union rescue deal that
includes a "substantial financial package" [] and
news that Daimler <DAIGn.DE> will build a 800 million euro car
plant there.
The forint, hammered in recent weeks by investors dumping
Hungarian assets due to fears over the country's dependency on
foreign lending, climbed 2 percent to 267.9 per euro from
Friday's close.
"This IMF deal is definitely a step forward, it eases some
of the worries there, although investors need more details about
it," said Elizabeth Gruie of BNP Paribas. "Also, it is still
interesting to see that you have investment interest in the
region."
Despite the positive news, Hungary scrapped a two-month bill
auction for 40 billion forints as demand was low [].
Later, in another auction, the Hungarian central bank bought
50 billion forints worth of government bonds, the planned full
amount. [].
FX MIXED
The Czech crown also firmed but the region was mixed. The
Croatian and Serbian central banks intervened to prop up the
kuna [] and the dinar [] currencies.
There were early losses for Poland's zloty, where the
government is working on a plan to shore up its banks
[]. S&P also cut Poland's outlook to stable from
positive [], but this only briefly hit the zloty,
which recovered towards the end of the session.
"If we had a normal stable market this information would
definitely have had an impact," a Warsaw dealer said.
"But right now, when we all know the situation in the region
is not enticing, the decision to cut the rating outlook takes a
back seat."
The zloty <EURPLN=> was up 0.76 percent at 3.8 to the euro.
The Czech crown <EURCZK=> was up 0.7 percent to 24.67 per
euro, despite a huge defeat for the ruling Civic Democrats in
local weekend elections that raised questions over the
government's survival [].
Dealers said the Czech crown would likely have low liquidity
this week due to a banking holiday on Tuesday, but the results
of the elections should not have an impact.
"The only thing that could perhaps a little bit impact the
crown would be the fall of the government," Komercni Banka said
in a morning note.
In Croatia, the central bank said it had sold 270.6 million
euros to commercial banks to back the kuna <EURHRK=>. At 1645
GMT, it had firmed to bid at 7.199 per euro, up 0.5 percent
from Friday's 7.2360/7.2420.
"Since the cause of kuna's weakening is not so much related
to the demand for euros, but to the increased liquidity after
(oil and gas firm) MOL's acquisition of (oil group) INA shares ,
this will hardly have a strong effect," a dealer at a major
local bank said.
The Serbian central bank also sold 26 million euros to try
to halt a slide on the dinar <EURRSD=>. Currency dealers said
the bank initially sold euros at 84.90 dinars. The rate expected
for Tuesday was 84.468 per euro, the lowest so far this year.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.67 24.843 +0.7% +6.9%
Polish zloty <EURPLN=> 3.8 3.829 +0.76% -5.54%
Hungarian forint <EURHUF=> 267.9 273.35 +1.99% -5.95%
Croatian kuna <EURHRK=> 7.199 7.236 +0.51% +1.74%
Romanian leu <EURRON=> 3.728 3.621 -2.95% -4.13%
Serbian dinar <EURRSD=> 85.077 84.34 -0.87% -8.02%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +21 basis points to 196bps over bmk*
5-yr T-bond CZ5YT=RR -18 basis points to +186bps over bmk*
10-yr T-bond CZ9YT=RR +18 basis points to +172bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -43 basis points to +461bps over bmk*
5-yr T-bond PL5YT=RR -22 basis points to +427bps over bmk*
10-yr T-bond PL10YT=RR -39 basis points to +350bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +1054bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +953bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +685bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1746 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters bureaus; Writing by Marius Zaharia;
Editing by Stephen Nisbet)
