* FX down, but stocks up as better U.S. consumer view helps
* Polish zloty, bonds steady after cbank decision
* Czech bonds stable after 2010 borrowing picture
(Updates with Polish cbank)
By Jason Hovet
PRAGUE, May 27 (Reuters) - Poland's zloty slipped on
Wednesday, but was little changed after the central bank as
expected left interest rates unchanged, while central European
currencies trailed an emerging market risk rally.
A higher U.S. consumer confidence reading on Tuesday boosted
investors' appetite for riskier emerging assets as it pointed a
smoother economic recovery, and central European bourses tracked
global peers higher.
But currencies gave up swift gains seen late in the previous
session as the region's two-month rally comes under scrutiny in
the face of still difficult economic times ahead.
"We are close to the top in stock (gains)," a central Europe
dealer at a foreign-based bank said. "I don't know how much more
positive we can go on emerging market currencies right now."
The zloty <EURPLN=> was down 0.5 percent from Tuesday's
domestic close by 1225 GMT, bidding at 4.436 to the euro, while
bond yields stayed steady at morning levels. Hungary's forint
<EURHUF=> led losses with a 0.9 percent drop to 283.26 per euro.
Poland's central bank held rates on Wednesday at an all-time
low of 3.75 percent on Wednesday, but cut the required reserve
rate for banks in a bid to boost liquidity. []
Analysts expected more cuts to come later as the economy
slows but the central bank still battles price pressures.
Central Europe's export-heavy economies have contracted due
to a fall in demand for their cars and electronics. Analysts are
still mixed as to whether Poland, where strong domestic demand
leaves it better off than peers, can post growth in 2009.
LOOKING FOR GROWTH
The zloty has led a central European currency rebound with
an 11 percent rise since mid-February, when it neared a low.
Better sentiment has lifted central European debt appetite
in that time, with the Czechs and Slovaks successfully placing
euro-denominated bonds in the past month. Hungary, which got a
$25 billion aid package last autumn, said on Wednesday it was
mulling a eurobond issue. []
Dealers and analysts said widening fiscal deficits and
rising pressure on banks from bad loans will keep currencies
under pressure in the coming months.
Moody's agency put several Polish and Czech banks on review
for downgrades late on Tuesday. [] []
"We expect (the rally) to maintain momentum for some while
but we think there are accumulating arguments, not least
technical ones, that we may be coming to an end," said SEB
strategist Mats Olausson, naming poor economic outlooks and
difficult financing stories among reasons.
Bond dealers said markets would watch for Polish first
quarter GDP data due out on Friday to gauge the budget impact.
In the Czech Republic, the government is cutting spending to
keep budget deficits under 5 percent of GDP in the coming years.
On Tuesday, Finance Minister Eduard Janota told Reuters 2010
borrowing should be around 260 billion crowns, a touch below
this year's level of an estimated 280 billion. []
Dealers said the figure was of little surprise, and Czech
yields were a touch up on longer-date bonds on Wednesday.
The Czech crown <EURCZK=> fell 0.2 percent to bid at 26.728
per euro. Romania's leu <EURRON=> edged 0.1 percent lower.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.728 26.672 -0.21% +0.09%
Polish zloty <EURPLN=> 4.436 4.415 -0.47% -7.24%
Hungarian forint <EURHUF=> 283.26 280.72 -0.9% -6.96%
Croatian kuna <EURHRK=> 7.303 7.274 -0.4% +0.85%
Romanian leu <EURRON=> 4.179 4.175 -0.1% -3.94%
Serbian dinar <EURRSD=> 94.55 94.386 -0.17% -5.36%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 148bps over bmk*
4-yr T-bond CZ4YT=RR +6 basis points to +165bps over bmk*
8-yr T-bond CZ8YT=RR +8 basis points to +258bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +417bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +317bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +273bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1436 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; editing
by Patrick Graham and Andy Bruce)
