* Hungary cbank cuts rates by 50 bps as expected
* Polish output rises 15 pct m/m in Sept
* Zloty up after data, forint firmer after decision
(Adds bonds, more detail)
By Krisztina Than and Dagmara Leszkowicz
BUDAPEST/WARSAW, Oct 19 (Reuters) - Hungary's forint was a
touch firmer after the country's central bank cut its base rate
by half of a percentage point, while the zloty gained after
better than expected output data on Monday.
Hungary's central bank cut its base rate to more than 3-year
low at 7.0 percent and analysts said there was room to cut the
rate further in the coming months. []
"The NBH lowered rates in line with expectations so this is
probably fairly neutral for the forint," said Anette Skovgaard
at Nordea bank. "According to our view on real economic
developments and the forint, there is still plenty of room to
cut rates in the coming months."
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.
[]
By 1246 GMT the forint <EURHUF=> was up 0.6 percent to the
euro, while Hungary's bond yields dropped a few basis points
after the rate announcement.
In Poland, statistics office data showed industrial output
fell 1.3 percent on a yearly basis, but it jumped 15 percent in
month-on-month terms in September.
Poland's zloty <EURPLN=> gained slightly after the data and
was 0.5 percent stronger to the euro.
"Pretty good numbers and it is clear that the worst probably
is over for Polish industry and in the coming quarters we should
return to positive year-on-year growth in industrial
production," said Lars Christensen at Danske Bank.
"The NBP (central bank) is likely to remain on hold, but the
hawks on the MPC could use the recovery in the manufacturing
sector as an argument in favour of a "neutral bias" rather than
the present "easing bias" in monetary policy."
To underpin slowing economic growth, the central bank's
Monetary Policy Council (MPC) has cut the main interest rate by
250 basis points to 3.5 percent since last November. Analysts
believe the MPC has already finished its easing campaign.
POLITICAL WRANGLING
Elswhere in the region, other currencies were mixed, with
the Czech crown <EURCZK=> gaining some 0.3 percent and Romania's
leu <EURRON=> 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.
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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.754 25.837 +0.32% +3.88%
Polish zloty <EURPLN=> 4.19 4.211 +0.5% -1.79%
Hungarian forint <EURHUF=> 265.45 266.96 +0.57% -0.72%
Croatian kuna <EURHRK=> 7.215 7.24 +0.35% +2.08%
Romanian leu <EURRON=> 4.292 4.286 -0.14% -6.47%
Serbian dinar <EURRSD=> 93.08 93.05 -0.03% -3.87%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +15 basis points to 118bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +128bps over bmk*
10-yr T-bond CZ10YT=RR -15 basis points to +102bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +353bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +310bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +500bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +445bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +396bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1346 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Krisztina Than and Dagmara Leszkowicz; Editing by
Andy Bruce/Victoria Main)
