* Zloty knocked down by central bank intervention
* Mkts spooked by Bulgaria's hidden deficit, fear spillover
* Investors in wait-and-see mode ahead of Hungary election
(adds Poland FX intervention, Bulgaria's hidden deficit)
By Marius Zaharia
BUCHAREST, April 9 (Reuters) - The zloty plunged on Friday
following the Polish central bank's first intervention in 10
years, while news hidden deficits had put a spanner in
Bulgaria's euro plans pressured other central European
currencies.
Poland's central bank said in a statement it bought foreign
currencies on the market, following a string of comments from
officials this week trying to talk the zloty down
[] [].
The intervention spread concerns that policymakers in other
central European markets might favour undervalued currencies to
help economies recover from their worst recession in decades.
"There is a sentiment others will do the same as Poland.
Romania has already done it and now investors are encouraged to
think more ... is to come," one dealer in Bucharest said.
Another case of regional contagion occurred after Bulgaria
announced it will delay plans to enter the ERM-2 euro entry
waiting zone because of unaccounted procurement deals that have
widened the deficit to 3.7 percent of GDP last year from an
initial 1.9 percent gap. [] [].
Dealers in Romania said investors became concerned that
other countries in central Europe could have hidden deficits
like Greece, and the leu weakened the most in the region
following Bulgarian news. []
"Obviously, we may see a deterioration of investor
sentiment. We've already seen an impact on the leu," said
Melania Hancila, chief economist at Volksbank in Bucharest.
"I do believe that investors will be very carefully
assessing data coming from Romania and other countries in the
region. CDS quotations may rise because of this situation in
Bulgaria."
At 1202 GMT, the zloty <EURPLN=> was 0.8 percent down at
3.876 per euro, after falling to an almost two-week low of
3.8907 earlier in the session. The leu <EURRON=> was down 0.6
percent to its lowest since Jan. 25.
Hungary's forint <EURHUF=> was 0.2 percent down, while the
Czech crown <EURCZK=>, seen as a safe haven in the region, was
flat compared to Thursday's close.
Stocks looked unfazed by the news, with regional bourses up
1-2 percent. Bonds were also little moved.
HUNGARY'S ELECTION
Hungarians will vote on Sunday in a first round of an
election that looks set to bring a landslide victory for the
opposition centre-right Fidesz party, giving it a strong mandate
for reforms [].
Fidesz, which campaigned on tax cuts and job creation, could
even secure a two-thirds majority, which would empower the party
to pass broader structural reforms.
"The market is in a wait-and-see mode," one trader in
Budapest said. "Indications for a chance of a two-thirds
majority (for opposition party Fidesz) on Sunday could reassure
markets and be mildly forint positive."
Hungarian bonds were steady, in line with peers, and
analysts say their bull run may continue after the election as
an expected strong majority government, a supply squeeze and
hopes for more rate cuts bode well [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.192 25.193 0% +4.47%
Polish zloty <EURPLN=> 3.876 3.846 -0.77% +5.88%
Hungarian forint <EURHUF=> 267.8 267.18 -0.23% +0.95%
Croatian kuna <EURHRK=> 7.27 7.27 0% +0.54%
Romanian leu <EURRON=> 4.141 4.116 -0.6% +2.33%
Serbian dinar <EURRSD=> 99.659 99.64 -0.02% -3.79%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 69bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +88bps over bmk*
10-yr T-bond CZ10YT=RR 0 basis points to +80bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +362bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +306bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +251bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +6 basis points to +468bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +406bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +372bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1502 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Marius Zaharia;
Editing by Ron Askew)
