WARSAW, Oct 28 (Reuters) - Poland's zloty jumped 3 percent
against the euro and the Hungarian forint was close behind on
Tuesday, benefiting from a rebound in Asian and European stocks
and optimism over an IMF rescue deal for Budapest.
The zloty strengthened as far as 3.6955 per euro from
Monday's close at 3.716 despite a credit outlook downgrade for
Poland by Standard & Poor's, and analysts said improving market
sentiment could stabilise the currency at this level.
"The sentiment overall is better, stocks are gaining. I
expect we'll have a couple of days of relief," said a dealer at
Warsaw-based bank.
European shares broke a five-day losing streak after a surge
in Asia []. In emerging European debt, yields on
Polish and Hungarian bonds dropped.
In Hungary, the forint rose 2.63 percent to 264.65 per euro.
Dealers said news of an imminent deal with the International
Monetary Fund and expectations of further fiscal tightening in
Hungary were big factors behind that move.
Late on Monday Hungary's ruling Socialist party gave its
support to an IMF financing deal which may lead to painful
spending cuts [].
"I think it's down to the IMF, but sentiment generally is
somewhat better. Asian stocks have turned positive, and this IMF
(loan) increasingly looks like a massive amount," said a
currency dealer in Budapest.
Central European stocks also surged, with Hungary's BUX
<> by 7.1 percent and Poland's WIG20 <> gaining 3.5
percent.
Dealers also said the zloty could be supported by the
government, which is expected to accept the timetable for
adopting the euro in 2012 later in the day.
ECB RATE CUTS?
Romania's leu was virtually unchanged, holding just above
the previous session's 10-day low against the euro which was set
after Standard & Poor's cut its foreign currency credit rating
one notch to "BB+", to junk status.
The Czech crown edged up 2.3 percent in thin trading due to
a bank holiday in Prague.
Warsaw dealers said the IMF plan to help Hungary as well as
Monday's comment from European Central Bank President
Jean-Claude Trichet that the bank might cut rates again next
week could also help over the short term.
"If the ECB decides on rate cuts, it is likely to weaken
euro, and as a result strengthen other currencies from the
region but I expect them to come back to its recent levels
soon," said Lukasz Wojtkowiak, FX analyst at Millennium Bank in
Warsaw.
On the bonds market, Polish and Hungarian yields dropped on
Tuesday and dealers said it is also the effect of a better mood
on the market.
Poland's bond yields were down by around 25 basis points and
Hungary's by 30 basis points from Monday's levels. Dealers said
the state of Hungary's fixed income market, which virtually
ground to a halt last week, was improving.
"Sentiment has improved due to the IMF deal," a fixed income
trader said. "The state of the bond market is also improving,
but this is a very slow process."
He said as long as banks on international money markets do
not start lending to each other, a major improvement cannot be
expected on emerging markets.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.194 24.763 +2.3% +8.69%
Polish zloty <EURPLN=> 3.716 3.831 +3% -3.21%
Hungarian forint <EURHUF=> 264.65 271.8 +2.63% -4.67%
Croatian kuna <EURHRK=> 7.206 7.187 -0.26% +1.64%
Romanian leu <EURRON=> 3.732 3.738 +0.16% -4.24%
Serbian dinar <EURRSD=> 84.557 84.897 +0.4% -7.36%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +21 basis points to +196bps over bmk*
5-yr T-bond CZ5YT=RR -18 basis points to +186bps over bmk*
10-yr T-bond CZ9YT=RR +18 basis points to +172bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -43 basis points to +461bps over bmk*
5-yr T-bond PL5YT=RR -22 basis points to +427bps over bmk*
10-yr T-bond PL10YT=RR -39 basis points to +350bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +1054bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +953bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +685bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1015 GMT.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
For related news and prices, click on the codes in
brackets: All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=> Middle East
spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX
<LATAMFX=>
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(Reporting by Reuters bureaus; Writing by Dagmara
Leszkowicz)
