* FX helped by firmer euro, U.S. data
* Polish zloty buoyed by tightening comments
* Greek worries persist, volatility seen ahead
(Adds detail, quote)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Feb 16 (Reuters) - The zloty firmed on
Tuesday on speculation Poland may hike rates faster, supporting
other currencies which were steady despite uncertainty over
Greece's ability to cut its budget deficit.
Polish central bank Governor Slawomir Skrzypek said the bank
may need to start considering interest rate hikes, but gave no
reasons or timing. []
The market expects Polish interest rates, at a record low of
3.5 percent, to rise in the second half of the year. Most
analysts say there is no hurry as the economy is only beginning
to strengthen, while inflation is seen easing ahead.
At 1531 GMT, the zloty <EURPLN=> was 0.7 percent firmer,
leading regional gains. The Czech crown <EURCZK=> and the
Romanian leu <EURRON=> were 0.1 percent up, while the Hungarian
forint <EURHUF=> was 0.2 percent weaker.
The region was helped by a stronger euro/dollar, and better
sentiment following good U.S. data [], but gains
where capped by worries about Greece, which was given 30 days by
its EU partners to show deficit reduction plans are on track.
[]
Dealers expect debt problems in the euro zone's periphery to
keep markets volatile in the near term, especially since no
detail was given of specific support measures or aid after a
meeting of European Union finance ministers on Tuesday.
Some market players have placed bets on a bailout
announcement on Tuesday and those positions may unwind in the
short-term, traders said.
"U.S. data probably compensates for what happened, but this
calm in the market may be temporary," one dealer in Bucharest
said.
RATE PLAY
Analysts see Czech and Polish policymakers reversing
monetary easing cycles dating back to 2008 later this year.
Hungarian and Romanian central banks, on the other side, are
still expected to ease lending conditions this year after
financial turmoil last year delayed cutting interest rates.
Traders say this differentiation may encourage intra-region
cross plays.
"As the expectation here (in Hungary) is further rate
easing, the same game may be played that we have seen in the
past month: the zloty is bought and the forint is sold," one
Budapest-based dealer said.
However, some players say recent risk aversion may prompt a
pause in rate easing in Hungary on Monday, although forward rate
agreements price in one more 25 basis point cut.
"The key thing is that the Greek problem casts a thick
shadow on us," one fixed income trader in Budapest said.
Polish bonds were little changed after the central bank
governor's comments on policy. The prospect of higher interest
rates usually hurts government bond prices.
Investors have bid heavily for Polish debt so far this year,
mostly in auctions with shorter maturities. On Wednesday, the
finance ministry tenders papers due in 2019.
Poland's president completed the make-up of the new central
bank policy council on Tuesday and first comments from two of
the three new members appeared less dovish than the market had
expected and added to the sentiment created by the governor's
comments [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.995 26.015 +0.08% +1.24%
Polish zloty <EURPLN=> 4.001 4.028 +0.67% +2.57%
Hungarian forint <EURHUF=> 272.4 271.97 -0.16% -0.75%
Croatian kuna <EURHRK=> 7.29 7.314 +0.33% +0.26%
Romanian leu <EURRON=> 4.113 4.117 +0.1% +3.02%
Serbian dinar <EURRSD=> 98.24 98.227 -0.01% -2.4%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -1 basis points to 98bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +141bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +121bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +390bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +329bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +291bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +552bps over bmk*
5-yr T-bond HU5YT=RR -7 basis points to +505bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +453bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1731 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia, editing by Stephen Nisbet)
