* Weaker US data push CEE currencies lower
* World Cup seen hitting trade volumes in next few weeks
* Markets keep close eye on fiscal targets
(Updates throughout)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, June 11 (Reuters) - Central European
assets fell into negative territory on Friday, hit by weaker
than expected U.S. retail sales data, and dealers said the start
of the World Cup tournament was likely to cap trade this month.
Sales at U.S. retailers unexpectedly dropped in May by 1.2
percent, raising concerns that the world's biggest economy is
losing steam and dragging down the euro, central Europe's main
reference currency.[]
"It was the U.S. retail data (after which the euro eased
against the dollar)," one Budapest-based dealer said. "Also
yesterday's firming was slightly overdone and the forint
returned to around 280."
By 1350 the forint <EURHUF=> led losses, falling 0.8
percent. The Polish zloty <EURPLN=> was down 0.2 percent, while
the Czech crown <ERUCZK=> was flat and the Romanian leu
<EURRON=> fell 0.3 percent.
Dealers said investors' mood remained fragile and any sign
of a retreat from spending cuts across the region could trigger
renewed market jitters. Trading volumes could suffer because of
the World Cup matches which kicked off on Friday, they said.
"Lower trade during sports tournaments is already a
tradition," said Remigiusz Zalewski, dealer at BRE bank in
Warsaw. "I expect the market to calm down at this time."
AUCTIONS EYED
Worries about fiscal discipline in the region were
highlighted by an auction in which Hungary sold less than
planned on Thursday, which was a first market test following the
announcement of its new economic plan. []
Romania is planning to hold an auction of six-month treasury
bills on Monday and dealers said the tender was likely to be
closely watched as the country's finance ministry faces a tough
task picking between paying considerably higher yields or
rejecting all bids. []
So far, the ministry has rejected bids at four debt tenders
since May 6 because mounting uncertainty over the government's
ability to enforce drastic austerity measures has pushed
investors to ask for higher yields.
The government faces a no-confidence vote a day after the
tender, so investors are likely to remain on edge.
Romania's government is expected to win a no-confidence vote
the day after the auction, but market jitters will not quickly
fade as social pressure rises and the austerity package may
still be rejected by the constitutional court.
Elsewhere, Hungarian bond yields rose, tracking the forint,
while Polish papers were flat ahead of next Wednesday's 10-year
bond auction.
In Poland, newly appointed central bank Governor Marek Belka
said the zloty was on a firming trajectory that could last for
years, underpinned by strong economic fundamentals. He also said
the current zloty rate would be good for euro zone entry, adding
that remained a "theoretical issue" for now. []
One of Poland's key hurdles to joining the euro is a large
budget deficit, though Finance Minister Jacek Rostowski said on
Friday this would drop below the 3 percent of GDP Maastricht
ceiling in the next 2-3 years. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25,724 25,725 0% +2,31%
Polish zloty <EURPLN=> 4,098 4,09 -0,2% +0,15%
Hungarian forint <EURHUF=> 280,8 278,65 -0,77% -3,72%
Croatian kuna <EURHRK=> 7,226 7,23 +0,06% +1,15%
Romanian leu <EURRON=> 4,229 4,216 -0,31% +0,2%
Serbian dinar <EURRSD=> 103,44 103,39 -0,05% -7,31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 165bps over bmk*
7-yr T-bond CZ7YT=RR +9 basis points to +172bps over bmk*
10-yr T-bond CZ9YT=RR +6 basis points to +164bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +415bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +382bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +320bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +624bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +578bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +492bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1550 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia and
Dagmara Leszkowicz; Editing by Toby Chopra and Susan Fenton)
