* FX softer after July gains as investors pause
* Polish cbank holds rates; zloty, bonds little moved
* Analysts say markets remain cautious
(Updates with Polish cbank)
BUDAPEST/PRAGUE, July 29 (Reuters) - Central Europe's
currencies slipped on Wednesday as investors paused from gains
this month, with the zloty little moved after the Polish central
bank left interest rates at a historic low, as expected.
Most stock markets in the region, which helped boost
currency gains in July, cooled but floated in positive
territory, with Prague <> up 0.3 percent after touching a
9-month high on Tuesday.
"The momentum has seemed to fade a little bit," said Ulrich
Leuchtmann, head of foreign exchange research at Commerzbank in
Frankfurt. "But the thing to watch is that the (currency)
appreciation speed seems to be unsustainable."
The zloty <EURPLN=> bid 0.2 percent lower at 4.189 to the
euro by 1321 GMT, while the Hungarian forint dipped 0.2 percent
but held the strong side of 270 per euro. Romania's leu
<EURRON=> also dipped 0.2 percent.
The Czech crown also pulled back from highs hit in the past
two weeks on profit taking.
Polish bonds were little changed after the central bank
decision, with the market waiting for central bank comments due
at 1400 GMT.
RATES IN FOCUS
The Czech central bank is also expected to pause its 225
basis point easing cycle started a year ago when it meets on
Aug. 6, although analysts were split whether another cut could
come then. []
And surprises are still possible. The Polish move followed a
bigger than expected 100 basis point cut out of Hungary this
week. []
Analysts say central banks in the region are nearing a
bottom in their rate easing cycles, although renewed currency
strength, stubbornly poor economic data and uncertainty over the
timing of economic recovery could leave room for more rate cuts.
Lithuanian GDP numbers released on Tuesday, which showed a
22.4 percent plunge in economic output, continued to weigh on
central European markets, analysts said.
Analysts and dealers have questioned whether the quick
strengthening of assets match fundamentals after investors
scooped up emerging markets assets in the past month, leading to
a 6 percent rise this month for the zloty.
"The EMEA markets seem to be in somewhat of a wait-and-see
stance with the global stock market rally pausing," Danske Bank
said in a comment.
"Despite prospects for an IMF deal for Latvia, the markets
remain worried. The weak Lithuanian GDP numbers for Q2 calls
into question whether the worst is really over for the Baltics,
and the risk of spill over to the rest of CEE remains high."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.565 25.512 -0.21% +4.65%
Polish zloty <EURPLN=> 4.189 4.182 -0.17% -1.77%
Hungarian forint <EURHUF=> 269.3 268.8 -0.19% -2.14%
Croatian kuna <EURHRK=> 7.34 7.326 -0.19% +0.34%
Romanian leu <EURRON=> 4.215 4.205 -0.24% -4.76%
Serbian dinar <EURRSD=> 93.253 93.54 +0.31% -4.05%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -28 basis points to 108bps over bmk*
4-yr T-bond CZ4YT=RR +1 basis points to +159bps over bmk*
8-yr T-bond CZ8YT=RR -1 basis points to +275bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +371bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +298bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -33 basis points to +741bps over bmk*
5-yr T-bond HU5YT=RR -32 basis points to +658bps over bmk*
10-yr T-bond HU10YT=RR +37 basis points to +557bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1527 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Jason Hovet/Krisztina Than/Sandor Peto; Editing
by Andy Bruce/Victoria Main)
