* Hungary cbank seen cutting rates by 50 bps at 1200 GMT
* Polish zloty firmer ahead of output, PPI data
* Hungarian, Polish bonds steady, Czech yields shade higher
(Adds bonds, more detail)
By Krisztina Than
BUDAPEST, Oct 19 (Reuters) - Eastern Europe's currencies
were little changed on Monday, with the Polish zloty higher
ahead of September output data and the forint steady ahead of an
expected further cut in Hungary's key interest rates.
Hungary's central bank is expected to cut its key base rate
to 7 percent from the current 7.5 percent <NBHI>, after reducing
rates by a total of 200 basis points in the past three months, a
Reuters survey showed. []
The region's currencies have gained steadily since March on
a global risk rally that has driven huge gains for stock markets
and emerging markets as faith grew that the economy would
recover from last year's financial crisis.
But analysts say there are risks to eastern Europe's own
recovery from the need to rein in budgets and political
uncertainty, most recently in Romania.
At 0857 GMT the forint <EURHUF=> was steady at around 266.84
versus the euro, the Czech crown <EURCZK=> was up 0.2 percent
and the Polish zloty <EURPLN=> was up 0.3 percent.
The forint has gained some 19 percent since all-time lows of
around 317 hit in March, while the zloty gas gained about 17
percent since its lows reached in February.
Interest rates in Hungary, one of Europe's worst-hit
economies, are seen bottoming out lower next year than
previously thought and inflation is undershooting previous
estimates as a deep economic recession curbs domestic demand.
[]
"The market is in a wait-and-see mode and this is what we
can expect until 1200 GMT, the (Hungarian) rate decision," a
Budapest-based dealer said.
The region's stock markets were mixed, with Budapest <>
down 0.3 percent, Prague <> up 0.36 percent and Warsaw
<> rising 1.6 percent by 0905 GMT.
The Romanian leu <EURRON=> was stuck in recent ranges, just
off a seven-month low hit last week after the government
collapsed.
Prime Minister designate Lucian Croitoru is expected to meet
political parties later in the day in a bid to garner support to
form a new government. Observers say he is facing an uphill
battle after opposition parties reiterated over the weekend
their support for another candidate.
Dealers said while political wrangling is hurting market
sentiment, players fear a central bank intervention close to 4.3
per euro, a level they say it has defended in the past weeks.
The central bank has declined to comment.
"Volumes in the market are lower with every day that
passes," one dealer said. "We are basically stuck at these
levels and I see no special interest in going either way."
"I don't think that it will be a surprise for the market if
Croitoru fails to form a government, but it will be a positive
if he miraculously succeeds," the dealer added.
BONDS MOSTLY STEADY
Hungarian bonds were steady ahead of the rate decision, as
markets widely expect a 50 basis point cut, while Polish yields
were also unchanged ahead of a release of industrial output and
producer prices data for September at 1200 GMT on Monday.
Analysts polled by Reuters expect a 2.2 percent fall on a
year-on-year basis in output and 2.2 percent rise year-on-year
PPI and investors will search the data for clues on the
country's recovery prospects.
"If output data is weaker than the market consensus then 2-
and 5-year bonds may strengthen," a fixed income trader at a
Warsaw bank said.
To underpin the slowing economic growth the central bank's
Monetary Policy Council (MPC) has already cut the main interest
rates by 250 basis points to 3.5 percent and analysts expect the
MPC to have already finished its easing campaign.
They expect no change in key interest rates at least until
early 2010 when the first rate hike is expected.
Czech yields were mostly higher on Monday, especially on the
shorter end as markets corrected a touch from recent gains.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.781 25.837 +0.22% +3.77%
Polish zloty <EURPLN=> 4.198 4.211 +0.31% -1.98%
Hungarian forint <EURHUF=> 266.84 266.96 +0.04% -1.23%
Croatian kuna <EURHRK=> 7.223 7.24 +0.24% +1.97%
Romanian leu <EURRON=> 4.29 4.286 -0.09% -6.42%
Serbian dinar <EURRSD=> 93.02 93.05 +0.03% -3.81%
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +352bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +309bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +279bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +502bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +449bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +404bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1057 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Krisztina Than; Editing by Andy Bruce)
