* Zloty boosted by rate hike expectations, yields up
* Hungary c.bank keeps rates unchanged as expected
* Forint lower, leu off peak, crown stable
(Updates Hungary cbank comments, yields)
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 expected the bank to hold fire for a second month
after a combined 75 basis points of tightening around the turn
of the year brought the key rate to 6 percent, which have also
been heavily criticised by the government. []
Bank Governor Andras Simor said the decision was unanimous,
and added the current rate level may need to be sustained to
help the bank reach its inflation target. []
The forint <EURHUF=> lost 0.3 percent to 267.0 to the euro
by 1434 GMT, mostly steady after the decision. Hungary bond
yields were mixed, ticking down at the short end.
"The Council said it would look at the figures and it sees
no reason either to hike or cut rates... after a tightening
cycle, this can be regarded as a dovish message," a
Budapest-based trader said.
Emerging European currencies were little moved by an
afternoon upswing in stock markets and the euro. Currencies
often track the euro/dollar cross. []
In Poland, the zloty <EURPLN=> added a touch to morning
gains and was bid up half a percent against the euro. This
helped it recoup recent losses from a market wobble triggered by
news that imports from Germany may have been misreported and a
big revision to recent economic data may be necessary.
The National Bank of Poland indicated it was not finished
with rate hikes after a January increase, giving a boost to the
zloty ahead of a April 4-5 rate-setting meeting, while pushing
bond yields up a few basis points.
Governor Marek Belka commented on Monday that the bank would
continue to raise interest rates, but the pace of further moves
will depend on the state of the economy as inflation remains
under control. []
"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 0.5 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. However, they see a chance the
revamped council could introduce monetary stimulus later this
year to boost lending and assist the government's pro-growth
policies. []
"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."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.524 24.532 +0.03% +1.94%
Polish zloty <EURPLN=> 3.989 4.012 +0.58% -0.78%
Hungarian forint <EURHUF=> 267.00 266.28 -0.27% +4.11%
Croatian kuna <EURHRK=> 7.383 7.385 +0.03% -0.04%
Romanian leu <EURRON=> 4.107 4.085 -0.54% +3.07%
Serbian dinar <EURRSD=> 103.42 103.55 +0.13% +2.42%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 4bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +64bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +67bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +326bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +318bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 basis points to +468bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +435bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +388bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1635 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai and
Jason Hovet, editing by Catherine Evans and Susan Fenton)
