(Adds details, fixed income, byline)
By Jason Hovet and Sandor Peto
BUDAPEST/PRAGUE, Jan 9 (Reuters) - Central Europe's
currencies extended their losses on Friday, led downwards by
Romania's leu following a raft of weak regional trade data,
while the Russia-Ukraine gas dispute also weighed on sentiment.
Slovakia and Hungary exports fell sharply in November, while
Romanian export growth slowed down, depicting a grim growth
outlook in central Europe and further entrenching expectations
that the region's currencies will reflect the deep slowdown.
Analysts also expect prospects of monetary easing to weigh
on the region's currencies.
Romania's leu <EURRON=> stuck to record low levels, trading
at 4.23 against the euro at 1448 GMT, weaker by 1.27 percent on
Thursday, even though some market players had booked profits at
4.2.
Market participants said concern over the twin budget and
current account deficit soured sentiment and the central bank
did not repeat its earlier efforts to shore up the leu.
"The general feeling is that the central bank is letting the
leu loose, because Romania needs a weaker currency to adjust its
imbalances, especially the current account deficit," one
Bucharest-based dealer said.
"Also, absolutely nobody would have expected a budget
deficit of around 5 percent (last year). These kind of things
need to be reflected somewhere -- for instance, a weaker leu,"
the dealer said.
Market players were pondering at what levels the central
bank would step in. Analysts said the bank was unlikely to
contemplate any level but a rapid further fall by the currency
may force it to to intervene.
While Romania is regarded as one of the most vulnerable
economies in the region, the leu's fall contributed to a 1.21
percent weakening by the forint <EURHUF=> to 276.71 per euro, a
correlation which has not been typical in the past, dealers
said.
"I don't think that this link will remain strong," one
Budapest-based dealer said. "I expect further slow forint
weakening, anyway, partly due to weak macro data."
The minutes of the Hungarian central bank's last meeting
showed strong backing behind a rate cut in December, but
analysts noted that further forint falls may make the bank more
cautious.[][]
The Czech central bank is also expected to cut interest
rates further to help the economy which struggles like other
export-reliant economies in the region, hit by a drop in euro
zone demand.
The Czech crown <EURCZK=> shed 1.63 percent to trade at
26.665 against the euro.
"We think there is more upside (level) in EURCZK to come and
will be watching leading indicators for core Europe such as the
ZEW as a flag for when this trade idea might begin to mature,"
UBS said in a note.
Poland's zloty <EURPLN=>, which was hit hard last year,
firmed 0.2 percent to 4.041 against the euro.
The markets of the region's largest economy Poland got a
boost on Thursday with news the world's No. 2 PC maker was
moving its European manufacturing base there from Ireland, but
that was not enough to change the view on softer growth and
zloty weakening.
"It's always good news in terms of business climate, but we
have to remember that in the time of crisis good news is
overshadowed by bad news," a Warsaw dealer said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.665 26.237 -1.63% +0.33%
Polish zloty <EURPLN=> 4.041 4.049 +0.2% +1.8%
Hungarian forint <EURHUF=> 276.71 273.4 -1.21% -4.99%
Croatian kuna <EURHRK=> 7.325 7.307 -0.25% +0.54%
Romanian leu <EURRON=> 4.232 4.179 -1.27% -5.42%
Serbian dinar <EURRSD=> 94.139 94.26 +0.13% -5.21%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -9 basis points to 175bps over bmk*
5-yr T-bond CZ5YT=RR -1 basis points to +168bps over bmk*
10-yr T-bond CZ9YT=RR +8 basis points to +110bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +10 basis points to +342bps over bmk*
5-yr T-bond PL5YT=RR -8 basis points to +279bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +239bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -42 basis points to +821bps over bmk*
5-yr T-bond HU5YT=RR -49 basis points to +748bps over bmk*
10-yr T-bond HU10YT=RR +13 basis points to +594bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1614 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
*Benchmark is German bond equivalent.
All data taken from Reuters at 1548 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto/Jason
Hovet; Editing by Andy Bruce)
