PRAGUE, March 4 (Reuters) - Central European currencies
edged lower on Friday after the European Central Bank signalled
tighter policy ahead, while fiscal risks in Hungary added to the
pressure on the forint.
Budapest unveiled steps this week to cut Hungary's public
debt, the highest in Central Europe, aimed at keeping investor
confidence and avoiding a possible credit rating downgrade to
'junk' status.
A Moody's rating agency official said late on Thursday the
measures were supportive but that implementation and growth
risks remained. []
The forint <EURHUF=>, which has see-sawed since the Tuesday
reform announcements, was bid down a touch more than 0.1 percent
at 272.42 to the euro as of 0916 GMT.
The Polish zloty <EURPLN=> was down a touch at 3.99 to the
euro, just off the psychologically key 4 per euro level.
The Czech crown <EURCZK=>, seen as a safer haven in the
region, inched up 0.2 percent and the Romanian leu <EURRON=>
edged down 0.2 percent.
Despite gains against the dollar, emerging European
currencies came under pressure after ECB President Jean-Claude
Trichet said the bank may hike interest rates next month, far
earlier than markets expected. []
Analysts and dealers said the prospects of lower carry in
emerging Europe, where monetary tightening has started already
in Poland and Hungary but questions still remain over policy,
has dented currencies' attraction.
"We think (after the ECB meeting) the market will bet on a
higher rates scenario in the euro zone, with uncertainty
remaining in Poland concerning further moves by the Monetary
Policy Council (MPC). Such a discrepancy may push the zloty to a
level above 4 against the euro," BPH Bank analysts wrote in a
report.
"Consequently, MPC may change its outlook on inflationary
risks and seriously consider increasing rates at the coming
sitting."
The Polish central bank held off this week on a second rate
hike after increasing borrowing costs in January for the first
time since the financial crisis.
Hungary has raised interest rates by 75 basis points in
three moves since November but also paused at its last meeting,
and analysts believe its tightening cycle may be over.
Hungary's Fidesz government has called for lower interest
rates and changed the central bank law to effectively give the
government control over the appointment of a majority of rate
setters, a move criticised by the ECB. []
The Czechs have yet to start tightening policy. Markets are
pricing a first hike around June.
Dalimil Vyskovsky, an interest rate dealer at Komercni
Banka, said Trichet's remarks were likely to bring forward the
pricing of the rise in record low Czech policy rates.
"The euro curve has moved a lot and the Czech curve will
follow that regardless the Czech central bank rhetoric," he
said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.245 24.3 +0.23% +3.11%
Polish zloty <EURPLN=> 3.99 3.989 -0.03% -0.8%
Hungarian forint <EURHUF=> 272.42 272.05 -0.14% +2.04%
Croatian kuna <EURHRK=> 7.41 7.418 +0.11% -0.4%
Romanian leu <EURRON=> 4.215 4.207 -0.19% +0.43%
Serbian dinar <EURRSD=> 103.4 103.62 +0.21% +2.44%
All data taken from Reuters at 1018 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus; Writing by Jason Hovet; Editing
by Hugh Lawson)
