* Currencies retreat on U.S. data
* Forint, zloty still lead gains
* Romania says will not loosen budget
* Czech cbanker says rate cut not ruled out
(Recasts with new comments, prices)
By Sandor Peto
WARSAW/BUDAPEST, May 19 (Reuters) - Central Europe's main
currencies gave up some gains in late trade on Tuesday as weak
U.S. housing figures dented hopes for a quick global recovery.
The data triggered some outflows from risky emerging market
assets, while in Central Europe decision makers mulled loosening
state budgets and cutting central bank interest rates, measures
which can help the economies but may weigh on currencies. <ECON>
Swings by the region's currencies over the past weeks
reflected the volatile global mood driven by expectations for
the pace of future recovery from the global crisis, dealers and
analysts said.
"The region's currencies retreated because the U.S. figures
were worse than expected and equity futures also eased," one
Budapest-based dealer said. "I expect hectic movements ... based
on how the international markets sentiment goes.
Despite the retreat, Hungary's forint <EURHUF=> and Poland's
zloty <EURPLN=> were firmer against the euro from Monday by 1
and 1.1 percent, respectively, at 1330 GMT.
FISCAL LOOSENING
Hungary, which was the first European Union (EU) member in
October to secure international aid, was allowed on Monday by
the International Monetary Fund and the EU to raise its budget
deficit target this year and next.[]
The move allows Hungary to avoid further budget cuts which
would exacerbate economic contraction expected by the government
at 6.7 percent this year, but makes meeting the conditions of
adopting the euro more difficult for the country.
Romania, which has also secured international aid, said that
it had no plans to ask for more lenient fiscal conditions from
the IMF even though it was struggling with deep recession.
[]
The leu was flat at 4.162 per euro, while the Czech crown
gained 0.3 percent to 26.682.
RATE CUTS MULLED
The central banks of both countries may cut interest rates
further in the coming months to fight recession, analysts have
said. Czech central banker Mojmir Hampl said he would not rule
out further rate reduction. []
The zloty, which failed to join the rally on Monday, rose
sharply and broke though a key resistance level at 4.40 versus
the euro, as it tracked the forint and was supported by central
bank statements about growth and debt financing.
On the domestic side Poland's zloty was also boosted by a
report from the central bank that Poland has 63.9 billion euros
of external debt maturing in 2009 and that the country should
have no difficulty rolling over this debt. []
Comments by rate setter Dariusz Filar that Poland's economy
is likely to grow in 2009 and interest rates should stay flat
for now added support. []
Hungarian government bonds firmed slightly, while Polish
bonds were flat ahead of primary bond sales which will test
investors' appetite for risk on Wednesday in Poland and on
Thursday in Hungary.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.682 26.759 +0.29% +0.27%
Polish zloty <EURPLN=> 4.387 4.435 +1.09% -6.2%
Hungarian forint <EURHUF=> 279.43 282.23 +1% -5.68%
Croatian kuna <EURHRK=> 7.355 7.378 +0.31% +0.14%
Romanian leu <EURRON=> 4.162 4.163 +0.02% -3.55%
Serbian dinar <EURRSD=> 93.84 94.595 +0.8% -4.65%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -25 basis points to 142bps over bmk*
4-yr T-bond CZ4YT=RR -8 basis points to +191bps over bmk*
8-yr T-bond CZ8YT=RR -2 basis points to +271bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -8 basis points to +438bps over bmk*
5-yr T-bond PL5YT=RR -7 basis points to +337bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +293bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -30 basis points to +850bps over bmk*
5-yr T-bond HU5YT=RR -65 basis points to +770bps over bmk*
10-yr T-bond HU10YT=RR -53 basis points to +668bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1530 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz; editing by Stephen Nisbet/Ruth Pitchford)
