(adds details, bond data)
By Marius Zaharia
BUCHAREST, Oct 30 (Reuters) - Central European currencies
erased early gains to the euro on Thursday, as players booked
profits after an early rally triggered by a return to risk
following a Federal Reserve rate cut and Asian stocks gains.
Apart from the trend, the Czech crown <EURCZK=> was down
1.38 percent to 24.14 per euro. Dealers said a major European
bank had been selling crowns from the open in low liquidity.
The slide was speeded by comments from the Czech central
bank's governor, who said now was not the right time to set a
euro entry date [] and the crown had played a
positive role in shielding the Czech economy from the crisis.
"There have been some comments out of the central bank
saying we shouldn't rushing in to be in the (euro zone waiting
room) ERM-2," said a Prague-based trader. "Liquidity and the
market is volatile."
The Fed met market expectations by slashing its main policy
rate to 1 percent, triggering a rally on Asian share markets and
prompting a surge in emerging markets [].
Central European currencies have also seen relief after
weeks of panic selling from a $25 billion IMF/EU rescue package
for Hungary announced on Wednesday that raised hope among
investors that financial institutions will protect the region.
Analysts and diplomats say other countries in the region,
particularly the Baltics and Romania and Bulgaria, could be next
to seek aid.
The zloty <EURPLN=> was up over 2 percent in early session
but dealers said a regional profit taking made it gave back its
gains to trade 0.2 percent down at 3.565 per euro at 10.25 GMT.
The Hungarian forint <EURHUF=> was down 0.23 percent to 256.51
per euro, also after a good start.
"The Fed rate sent Asian stocks higher and restored risk
appetite. This is benign for the region," a Bucharest-based
dealer said. Other dealers later said gains were erased by a
general regional profit taking.
Markets seemed little affected from Wednesday's move by
Poland's central bank to leave interest rates flat. It also cut
its 2009 growth forecast to 2.8 percent. Romania's central bank
is expected to keep rates on hold later on Thursday.
In Poland, a hawkish central banker said Warsaw should leave
interest rates unchanged until at least the end of the first
quarter of 2009 [].
Dealers said a decline in the dollar against the euro, which
has come alongside a surge in commodities prices, was also
behind the regional move. In other trade, the Romanian leu
<EURRON=> was up 0.5 percent to 3.618 per euro.
DOWNWARD PRESSURE ON YIELDS
In bond markets, Hungarian yields plunged 70-80 basis points
on Wednesday boosted by the IMF deal but yields were expected to
stay at these levels for now.
A Budapest-based trader said the debt agency's announcement
on Wednesday [] that it would cancel all bond
auctions for the rest of the year had come as a surprise to the
market and boosted sentiment.
"(In the past three weeks) we have seen a well-coordinated
defence plan by the central bank, the finance ministry and the
debt agency, and this was the last measure," he said.
Hungary will auction 12-month treasury bills later on
Thursday and dealers say he did not expect massive demand, but
the papers will likely be sold. Meanwhile, Polish bond yields
were virtually flat early on Thursday from the previous session.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.305 23.811 -2.07% +8.27%
Polish zloty <EURPLN=> 3.565 3.558 -0.2% +0.99%
Hungarian forint <EURHUF=> 256.51 255.92 -0.23% -1.45%
Croatian kuna <EURHRK=> 7.163 7.165 +0.03% +2.23%
Romanian leu <EURRON=> 3.618 3.637 +0.52% -1.06%
Serbian dinar <EURRSD=> 84.907 84.6 -0.36% -7.8%
*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 Victoria Main)
