* Currencies erase early losses
* Stock gains lend support to FX
* Poland's euro doubts, Hungary CPI shrugged off
By Marton Dunai and Marius Zaharia
BUDAPEST/BUCHAREST, May 12 (Reuters) - Emerging Europe's
currencies held steady on Tuesday, as a rise in the region's
stock markets offset the impact of more signs of economic
headaches ahead.
Inflation eased in April in Romania and reached its lowest
in more than two years in Czech Republic, where industrial
output plunged 17 percent and joblessness crept higher,
underlining the depth of recession the region is facing.
[]
However, Czech credit default swaps have dropped to around
100 bps, their lowest reading since October, indicating a
reduced risk outlook for one of central Europe's most stable
economies.
"Regional currencies move together, but it is more a
reaction to what stock markets are doing and what the general
sentiment is and not to the data," one dealer in Bucharest said.
"Stocks are actually keeping currencies at these levels
despite weakening pressures from the recession and the crisis."
Hungary bucked the trend with an unexpected pick up in
inflation, which strengthened the case for holding interest
rates, which together with Romania's stand at the highest level
in the European Union at 9.50 percent.
Central banks in emerging Europe have slashed rates since
last autumn but have slowed the pace to keep financial stability
after currencies plunged to or near record lows in February.
In Poland, the zloty <EURPLN=> worked off early losses and
hovered at Monday's closing levels around 4.385 to the euro,
shaking off Finance Minister Jacek Rostowski saying a January
2012 euro adoption target date might have to be put off by a
year or more because of the global crisis. []
The Hungarian forint, the region's top performer in the
ongoing rally over the last two weeks, and the Czech crown
<EURCZK=> edged up around 0.1 percent by 1340 GMT, while
Romania's leu <EURRON=> traded flat.
Stock markets gave support with Warsaw <> gaining over
2 percent and Prague <> rising over 1 percent on Tuesday,
adding to more than 20 percent gains since April.
FINANCING NEEDS
The European Bank for Reconstruction and Development, which
slashed its 2009 GDP forecasts for the region to a 5.2 percent
contraction last week said it will need more capital if it has
to help those economies further. []
The lender said it was particularly concerned about
deteriorating economic conditions in the Baltic states, Hungary,
Ukraine and Russia.
Another international lender, the IMF, cut estimates of
eastern Europe's financing needs, indicating a less gloomy
overview of the vulnerable region. []
In debt markets, Poland was quiet as investors were waiting
for a 2-year bond tender on Wednesday and inflation data on
Thursday.
"The bond market is relatively calm although there is a
general warming up of sentiment, helped by stronger stocks as
well," said Maciej Slomka, dealer at Pekao Bank.
"Investors are now awaiting Wednesday's bond tender ... and
inflation data, which may shed light on rate policy ahead.
Hungarian government bonds were steady, in thin volumes.
A government auction of 3-month treasury bills attracted
sufficient demand and the government sold 40 billion forints
worth of papers as planned <HUAUCTION01>.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.72 26.764 +0.16% +0.12%
Polish zloty <EURPLN=> 4.385 4.386 +0.02% -6.16%
Hungarian forint <EURHUF=> 278.56 278.92 +0.13% -5.39%
Croatian kuna <EURHRK=> 7.348 7.352 +0.05% +0.23%
Romanian leu <EURRON=> 4.15 4.151 +0.02% -3.27%
Serbian dinar <EURRSD=> 94.475 94.475 0% -5.29%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 152bps over bmk*
4-yr T-bond CZ4YT=RR +17 basis points to +197bps over bmk*
8-yr T-bond CZ8YT=RR -2 basis points to +278bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +8 basis points to +429bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +288bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -16 basis points to +843bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +774bps over bmk*
10-yr T-bond HU10YT=RR -6 basis points to +645bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1640 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marton Dunai and
Marius Zaharia; editing by Stephen Nisbe...)
