* FX hold strong, but some warn gains may be too much
* Hungary bond yields fall as markets shake Greece worries
* Serb dinar test new lows
(Adds bonds, Serb dinar, quotes)
By Jason Hovet
PRAGUE, Feb 2 (Reuters) - The Polish zloty and Romanian leu
briefly hit fresh 13-month highs on Tuesday on the back of
optimism about global and regional growth, while Warsaw's
privatisation plans soothed nerves over its finances.
The zloty broke through the psychological 4.0 per euro level
this week, and Hungary's forint and the Czech crown hit two-week
peaks as investors turned more positive on a recovery that makes
central Europe look a safer bet than much of the euro zone.
Currencies are seen firming this year although some analysts
have warned gains to start the year are getting overheated given
concerns over public finances and upcoming elections.
The zloty <EURPLN=> ticked up 0.1 percent to bid at 3.978 to
the euro by 1035 GMT, off earlier highs, and the leu <EURRON=>
steadied at 4.085 to the euro. The two have led the region this
year with 3.2 percent and 3.7 percent rises, respectively.
The crown <EURCZK=> inched up to 25.9 to the euro, while the
forint <EURHUF=> gained 0.2 percent to 269.4 to the euro.
"We see further PLN gains fairly limited in the short term,"
Danske Bank analysts said in a client note. "Overall we think
that the CEE currencies are trading at fairly strong levels and
we see a possibility of a negative correction going forward,
especially if Greek concerns intensify."
The euro <EUR=>, central Europe's main reference currency,
has been weakened this month by concerns over Greece's
spiralling budget gaps and analysts warn any worsening of
Athens' troubles could raise risk aversion in Europe and hurt
markets again.
OWN PROBLEMS
The flip side is that Hungary, Poland and the Czech Republic
have done much of the work that still lies ahead of Greece to
reduce overspending in the budget.
Bond yields in Hungary fell 5-6 basis points, and are 15
basis points below levels seen before Greek worries rattled
markets. Hungary was the first in the region to reach out for
International Monetary Fund funds during the financial crisis
but plans to come off the aid this year.
Dealers said bonds looked set to extends gains as the
central bank eases interest rates in the coming months.
There are still concerns over Central Europe's own fiscal
position, though., Analysts say governments are reliant on
growth to bring down their deficits and do not hold out much
hope of further fiscal reform before elections this year and
next.
Manufacturing indices in Poland, Czech Republic and Hungary
show growth was likely in the coming months, which would help
state coffers hit during the economic downturn. []
Poland's government said last week it would cap budget
spending and speed up the sale of state assets in a drive to
counter a rise in its public sector deficit, which one official
said on Monday would now hit 7 percent of GDP this year -- much
more than previously planned. []
The zloty has found support this week from state plans to
start bookbuilding on the sale of a 16-percent stake in
electricity provider Enea. [] But analysts warn the
Polish privatisation plan still could prove risky.
"Obviously these privatisations mean that foreign investors
can buy zloty and are therefore good news for the Polish
currency," Commerzbank analysts said in a note.
"At the same time they mean that the Polish government has
to sell the family heirlooms in an effort to make the budget
look a bit better and reach a level of debt that seems to
conform to the constitution. This kind of budget policy is
certainly not good news for the zloty."
In Serbia, the dinar <EURRSD=> tested new lows on Tuesday,
falling to 98.95 per euro, prompting the central bank to
schedule its eighth intervention this year. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.9 25.943 +0.17% +1.61%
Polish zloty <EURPLN=> 3.978 3.981 +0.08% +3.17%
Hungarian forint <EURHUF=> 269.4 269.89 +0.18% +0.35%
Croatian kuna <EURHRK=> 7.314 7.314 0% -0.07%
Romanian leu <EURRON=> 4.085 4.082 -0.07% +3.73%
Serbian dinar <EURRSD=> 98.63 98.23 -0.41% -2.79%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +5 basis points to 98bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +140bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +126bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +538bps over bmk*
5-yr T-bond HU5YT=RR -7 basis points to +492bps over bmk*
10-yr T-bond HU10YT=RR -8 basis points to +438bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1137 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham)
