(Corrects in para 7 to say U.S. bond markets, not all U.S.
markets, were closed for a holiday)
* Fx, bonds move sideways in slow trade, equities firm
* Czech, Romanian CPI tick up, cbanks eyed
* Czech cbanker says no need to intervene against crown
By Krisztina Than and Sandor Peto
BUDAPEST, Oct 11 (Reuters) - Emerging European currencies
moved in tight ranges on Monday as Czech and Romanian annual
inflation picked up in September and investors pondered the
impact of billowing inflows of funds on exchange rates.
Inflation has been of less concern to regional policymakers
since the financial crisis, with central banks in Hungary and
Romania more focussed by the impact of public finance troubles
and IMF bailouts on their debt and currency markets.
But debate is beginning in some countries over whether or
not price growth is taking hold in a nascent recovery and when
will be the right time to start tightening monetary policy.
A wave of portfolio investment floods into emerging Europe
is also driving up currencies, tempering inflation but also
putting potential pressure on manufacturing-led export growth.
Hungary will publish inflation data on Tuesday and Poland on
Wednesday, and their inflation rates are also expected to rise,
while the Hungarian government could present closely-watched
budget plans for 2011 later this month.
The zloty <EURPLN=> eased 0.2 percent against the euro by
1011 GMT to 3.975 and the Czech crown <EURCZK=> shed 0.1 percent
to 24.492. The forint <EURHUF=> firmed 0.1 percent to 274.55,
while the leu <EURRON=> was flat at 4.265.
Trading was thin as U.S. bond markets were closed for a
holiday and players digested economic data which boosted
expectations that the U.S. Federal Reserve would adopt more
quantitative easing to shore up the U.S. economy.
Those expectations lifted equity markets. Central Europe's
main equity indices rose by 0.1-0.7 percent, but dealers said
investor appetite looked more uncertain than last week.
September Czech inflation was a touch higher than expected
and reached the central bank's 2 percent target. []
KBC analysts said Czech forward rate agreement (FRA) rates
had started to creep up, partly tracking euro zone rates but
also helped by possible bets in the market on a central bank
interest rate hike coming sooner than expected.
"We still think that rate hike bets are premature, because
the koruna is strong, while inflationary pressures are pretty
weak," KBC said in a note.
The crown has been the best-performing emerging European
currency this year and central bank chief Miroslav Singer said
in a presentation released on Monday that there was no reason to
intervene against its strength. []
Daily Hospodarske Noviny quoted Singer as saying the crown's
present value was not dramatic although "the pace of
appreciation in the past days was rather steep."
Romanian annual inflation ticked up to 7.8 percent from 7.6
percent in August. Analysts had expected a flat rate, and some
of them said that the figures can strengthen expectations for a
central bank rate hike next year. []
For now, though, most analysts are backing rates to stay on
hold for the next six months, with some still pondering whether
the bank may be able to ease policy in between times to support
growth.
"Sometime at the start of next year it is possible to see a
hike," said Nicolaie Alexandru-Chidesciuc of ING in Bucharest.
HUNGARY AWAITS BUDGET PLANS
Dealers said the forint, the best performer in the region in
the past month, was unlikely to return to 5-month highs touched
last week at 268.70 to the euro.
"The relatively quick shift in the forint rate shows to us
that the recent firming can be quickly undone, as it is based on
very uncertain fundamentals (i.e. optimistic expectations
regarding the government's future budget policy)," CIB Bank said
in a morning note on Monday.
Hungary's budget deficit <HUDEF=ECI> stood at 125 percent of
the government's full-year target in September, and analysts
said very tight fiscal policy was needed to meet the year-end
target. []
The market is awaiting details of the 2011 budget, which the
Economy Ministry is due to submit to the government by Friday,
although it is not clear when they will be made public.
Markets will be closely eyeing details of the budget plans
to see if the government's pledge to cut the deficit to below 3
percent of GDP next year is backed up by sustainable measures.
Hungarian Prime Minister Viktor Orban will unveil a second
economic action plan later this week, laying the foundations for
the budget deficit to meet the European Union's requirements,
the daily Nepszabadsag wrote on Monday.[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.492 24.469 -0.09% +7.46%
Polish zloty <EURPLN=> 3.975 3.967 -0.2% +3.25%
Hungarian forint <EURHUF=> 274.55 274.72 +0.06% -1.53%
Croatian kuna <EURHRK=> 7.319 7.315 -0.05% -0.13%
Romanian leu <EURRON=> 4.265 4.265 0% -0.65%
Serbian dinar <EURRSD=> 106.13 105.81 -0.3% -9.66%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 84bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +101bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +97bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +379bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +359bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +317bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +545bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +505bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +442bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1211 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Krisztina Than/Sandor Peto; Editing by Susan
Fenton)
