* FX down, stocks mixed
* Polish zloty, bonds steady after cbank decision
* Czech bonds stable after 2010 borrowing picture
(Updates with new prices, comments)
By Jason Hovet
PRAGUE, May 27 (Reuters) - Poland's zloty slipped on
Wednesday, but was little changed after the central bank left
interest rates unchanged, as expected, while central European
currencies gave up ground after an emerging market risk rally.
A higher U.S. consumer confidence reading on Tuesday boosted
appetite for riskier emerging assets as it pointed a smoother
economic recovery, and Central Europe's bourses tracked global
peers higher.
But currencies and equities 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 1433 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 283.35 per euro, while the Czech crown<EURCZK=> and the
Romanian leu<EURRON=> shed 0.2 and 0.1 percent, respectively.
"The sentiment towards emerging markets is more negative
this week," one Budapest-based dealer said, adding that 283.50
and then 285 would be technical support levels for the forint.
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 said the
move was unlikely to translate into more credit for the economy.
[]
Analysts expect rate cuts to come later as the economy slows
but the central bank still battles price pressures. Hungary's
central bank which also kept rates on hold early this week is
also expected to cut them later this year.[]
Central Europe's export-heavy economies have contracted due
to a fall in demand for their cars and electronics.
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.
Hungary's central bank said the country's deficit could
overshoot the target next year unless the government adds
further measures to budget cuts already decided.[]
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.723 26.672 -0.19% +0.11%
Polish zloty <EURPLN=> 4.436 4.415 -0.47% -7.24%
Hungarian forint <EURHUF=> 283.35 280.72 -0.93% -6.99%
Croatian kuna <EURHRK=> 7.318 7.274 -0.6% +0.64%
Romanian leu <EURRON=> 4.181 4.175 -0.14% -3.98%
Serbian dinar <EURRSD=> 94.42 94.386 -0.04% -5.23%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 144bps over bmk*
4-yr T-bond CZ4YT=RR -1 basis points to +158bps 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 -10 basis points to +414bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +313bps over bmk*
10-yr T-bond PL10YT=RR +11 basis points to +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -25 basis points to +820bps over bmk*
5-yr T-bond HU5YT=RR -61 basis points to +738bps over bmk*
10-yr T-bond HU10YT=RR -35 basis points to +649bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1633 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/Andy Bruce/Victoria Main)
