* Zloty knocked down by central bank intervention
* Bulgaria drops ERM-2 entry plans, mkt spooked
* Investors in wait-and-see mode ahead of Hungary election
(Updates throughout)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, April 9 (Reuters) - The zloty fell on
Friday after the Polish central bank's first intervention in 10
years, while other central European currencies were pressured by
Bulgaria's decision to delay its euro plans after revealing a
hidden budget deficit.
Poland's central bank said in a statement it bought foreign
currencies in the market, following a string of comments from
officials this week trying to talk the zloty down.
[] []
The central bank's deputy governor Witold Kozinski said
later in the day the bank could not rule out further
interventions in the currency market. []
The intervention raised concerns that policymakers in other
central European countries 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," a dealer in Bucharest said.
Another case of regional contagion occurred after Bulgaria
announced it was delaying 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 was worst hit by the 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 1413 GMT, the zloty <EURPLN=> was down 0.6 percent at
3.871 per euro, off almost two-week lows hit earlier in the
session.
The leu <EURRON=> was down 0.5 percent, while the Czech
crown <EURCZK=> was almost flat and Hungary's forint <EURHUF=>
gained 0.3 percent from Thursday's close.
HUNGARY'S ELECTION
Hungarians will vote on Sunday in the 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, 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 [].
The forint, however, is set to give up some ground in the
next few months after the elections, a monthly Reuters poll
showed on Friday, but is poised for a modest gain of less than 1
percent over a 12-month horizon.[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.187 25.195 +0.03% +4.49%
Polish zloty <EURPLN=> 3.871 3.847 -0.62% +6.02%
Hungarian forint <EURHUF=> 266.55 267.36 +0.3% +1.43%
Croatian kuna <EURHRK=> 7.27 7.27 0% +0.54%
Romanian leu <EURRON=> 4.133 4.114 -0.46% +2.53%
Serbian dinar <EURRSD=> 99.61 99.61 0% -3.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -11 basis points to 63bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +83bps over bmk*
10-yr T-bond CZ10YT=RR -5 basis points to +75bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +350bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +295bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +245bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +458bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +398bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +364bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1613 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marius Zaharia;
Editing by Susan Fenton)
