* FX edge up, euro zone data help
* Investors wait for EU Summit and rate meetings
* Serbia's dinar steady after c.bank gov resignation
(adds fixed income, euro zone, Polish data)
By Marius Zaharia
BUCHAREST, March 24 (Reuters) - Central European currencies
edged up on Wednesday, as improving data in the euro zone
increased recovery expectations in the region, although doubts
over a deal to help debt-laden Greece weighed.
Business sentiment in Germany, the region's main trading
partner, surged to its highest level since June 2008, beating
all forecasts, while euro zone manufacturing activity grew at a
rate not seen since the end of 2006, improving the outlook for
central Europe's recovery [] [].
But enthusiasm was offset by uncertainty about financial
support for Greece, which has hurt risk appetite and sent the
euro to 10-month lows against the dollar.
Regional currencies often track euro/dollar moves, but they
have become more resilient recently as investors focused on
central Europe's better debt position compared to some countries
at the euro zone's periphery.
Investors were eyeing a European Union summit on Thursday
and Friday. The EU's monetary affairs chief Olli Rehn said the
bloc must decide on a way to help Greece or run the risk of
causing a "serious disruption" for the euro. []
"CE3 are still trading in relatively tight ranges, squeezed
between statements around Greece, risk appetite in the equity
markets and the fate of the falling euro," SEB analysts said in
a morning note.
AT 1042 GMT, the Czech crown <EURCZK=>, the Hungarian forint
<EURHUF=> and the Polish zloty <EURPLN=> were 0.1-0.3 percent
firmer, while the Romanian leu <EURRON=> was down 0.2 percent.
Serbia's dinar <EURRSD=> was 0.2 percent lower a day after
central bank Governor Radovan Jelasic announced his resignation
[]. The surprise statement pressured the unit on
Tuesday and forced the bank to intervene.
In bond markets, Hungarian and Polish bonds gained slightly,
while Czech bonds gave up recent gains ahead of Thursday's
central bank meeting.
RATE OUTLOOK
The Czech central bank is seen keeping interest rates
unchanged on Thursday, but markets will watch for clues about
when tightening might begin.
Analysts expect the bank to sound a more dovish tone given
the crown's recent strength and still weak consumer demand.
"No rates change expected, but risks to less hawkish
rhetoric do exist as inflation pressures now seem to be lower
and FX is also way stronger than the central bank's forecasts,"
Komercni Banka traders said in a daily note.
Romanian and Hungarian central banks meet on Monday and both
are seen cutting rates further. Poland is holding a rate-setting
meeting on March 31 and it is expected to hold fire.
The Czech Republic and Poland were seen raising interest
rates later this year, but recent currency strength signals
monetary tightening might be delayed, analysts said.
Weak retail sales and unemployment data in Poland on
Wednesday have also raised expectations rates will remain at
record lows for a longer period. []
"This is all a very bad prognosis for consumption, which so
far has driven the economy," said Michal Dybula, chief economist
at BNP Paribas in Warsaw.
"Any talk of rate hikes this year is nonsensical."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.38 25.443 +0.25% +3.7%
Polish zloty <EURPLN=> 3.884 3.887 +0.08% +5.66%
Hungarian forint <EURHUF=> 263.9 264.38 +0.18% +2.44%
Croatian kuna <EURHRK=> 7.258 7.259 +0.01% +0.71%
Romanian leu <EURRON=> 4.069 4.063 -0.15% +4.14%
Serbian dinar <EURRSD=> 99.763 99.56 -0.2% -3.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +2 basis points to 86bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +112bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +103bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +307bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +246bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +475bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +422bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +395bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1242 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;
Editing by Susan Fenton)
