* Serb cbank chief quits, bank sells EUR to defend dinar
* Leu firms to 7-wk high on bank cap hike rumour
* Hungary 10-yr bond yields at 27-month low
* Fx mixed, eyes on Greece news, stocks firm
(Rewrites with Serb central bank, bonds, more detail)
By Sandor Peto and Dagmara Leszkowicz
WARSAW/BUDAPEST, March 23 (Reuters) - Serbia's central bank
intervened on Tuesday to defend the dinar after its governor
announced his resignation, while other currencies in Central
Europe were mixed in tight ranges.
Uncertainty over financial support from the European Union
for debt-stricken Greece weighed on the region's currencies and
threatened to curb their recent gains.
Hungary's forint<EURHUF=> and the Czech crown<EURCZK=> shed
0.1 percent versus the euro and the zloty firmed 0.1 percent.
Romania's leu <EURRON=> however firmed to seven-week highs
against the euro, gaining 0.4 percent by 1447 GMT, helped by
rumours of a capital hike by the Austrian owner of a local bank.
It was also helped by positioning for a seasonal firming
expected due to remittances from workers abroad ahead of Easter
holidays, dealers said.
Romanian stocks led gains in the region, with the main index
<> firming two percent. Budapest's <> rose 1.2 percent,
Warsaw's <> 0.7 percent and Prague's <> 0.4 percent.
Serbia's dinar was down 0.2 percent to bid at 99.749 per
euro. The central bank intervened to pull it back from record
lows beyond 100/euro after central bank governor Radovan Jelasic
said he would resign for personal reasons and the bank cut its
key rate by 50 basis points to 9 percent.[]
Analysts were concerned that the departure of Jelasic may
dent the bank's resolve to fight inflation.
"His resignation is for sure going to put pressure on the
dinar," said Miroslav Prokopijevic of Free Market Centre think
tank.
Dealers said the short-term movements of currencies in the
region will continue to depend on news about Greece's bailout,
but the region's assets remain relatively resilient.
"Greece will remain important," one Budapest-based dealer
said. "The forint could trade between 262 and 268 (to the euro)
in the short term, I don't expect big movements."
The zloty and the forint shot to 15-month highs last week
while the crown jumped to a five-month peak on the region's
improving economic outlook and lower debt levels. The units gave
up some ground this week.
RATE CUTS SEEN
Central bankers in the region warned in the past weeks
against excessive currency gains which could hinder economic
recovery.
The next expected central bank rate moves in Poland and the
Czech Republic are hikes from record lows, while Romania's and
Hungary's banks are seen cutting their rates at their meetings
next Monday, from 7 and 5.75 percent, respectively.
The Hungarian rate cut expectations, coupled with a low
primary supply mainly on the long end of the curve, reignited a
rally of government bonds and 10-year yields fell 20 basis
points to 27-month lows around 7 percent.
Interest from foreigners increased in the past weeks even
though Hungary's elections in April maintain risks over fiscal
policy. Hungarian banks have huge extra liquidity as lending to
the economy has not recovered after last year's deep recession.
"There is a huge amount, (over) 4,100 billion forints in the
central bank's two-week bills []. The bank will cut
rates, no question about that," a bond trader said.
In the Czech Republic, analysts expect the central bank to
keep rates at their current record low on Thursday. Although
rates are seen rising later this year or in early 2011, some see
risk on the easing side.
Markets mostly shook off speculation former Prime Minister
Mirek Topolanek will resign leadership of the right-leaning
Civic Democrats, which are running second in polls before
elections in May which may trigger crown losses.
-------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.46 25.432 -0.11% +3.37%
Polish zloty <EURPLN=> 3.887 3.892 +0.13% +5.58%
Hungarian forint <EURHUF=> 264.28 263.99 -0.11% +2.3%
Croatian kuna <EURHRK=> 7.259 7.26 +0.01% +0.69%
Romanian leu <EURRON=> 4.066 4.083 +0.42% +4.22%
Serbian dinar <EURRSD=> 99.749 99.577 -0.17% -3.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 85bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +118bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +106bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +475bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +424bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +395bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1547 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Sandor Peto and
Dagmara Leszkowicz; Editing by Susan Fenton/Ruth Pitchford)
