(Adds details, fixed income)
PRAGUE, Jan 23 (Reuters) - The Polish zloty fell to its
weakest since September 2004 on Friday, and the Czech crown
broke a key level to lead a drop in emerging European currencies
as investor sentiment soured on the region's growth prospects.
A rash of poor economic data in the past weeks has pointed
to a sharp slowdown in central Europe's economies as demand from
the euro zone collapses.
Central banks have started cutting interest rates to counter
sagging growth outlooks, which has added pressure on currencies.
The Czech crown <EURCZK=> weakened past 28 per euro for the
first time since August 2007 in early trade, which triggered
stop losses that added to its 1.2 percent fall. []
The Hungarian forint <EURHUF=> slipped 1 percent to 287.2 to
the euro, putting some pressure on the bond market, while
Romania's leu <EURRON=> outperformed with a 0.1 percent drop as
investors feared central bank intervention.
In Poland, whose 2012 euro ambitions have been questioned by
analysts, the zloty dropped to 4.395 to the euro by 1008 GMT,
down 0.7 percent from Thursday's closing levels, after passing
the key 4.40 level in earlier trade.
"Everything seems to support the fall in zloty. At the
moment there is no positive news for the zloty whatsoever," said
Bogumil Modzelewski, a forex dealer at BGK bank.
"Emotions and global sentiment prevail while zloty
fundamentals are changing, as various GDP growth forecasts are
cut."
The zloty has been hardest hit in the region in the past two
weeks, falling 8.9 percent, while the forint is off 3.4 percent
in that time and the crown 5.6 percent.
Poland on Thursday reaffirmed its 2012 target for adopting
the euro, but economists said slowing growth could undermine the
plan by putting a heavy strain on the budget. Analysts expect
euro entry in 2013 at the earliest. []
Polish bonds were quiet on Friday after a drop on Thursday
following the pricing of a five-year bond issue worth 1 billion
euros at a yield of 300 basis points over mid-swaps.
[]
The spread was a huge rise on the Poles' last euro issue --
a 2 billion euro 10-year bond last June -- which had gone at 60
bps over mid-swaps, reflecting recent crowding of the debt
market by countries borrowing to stimulate their economies.
Government growth forecasts have come under heavy strain as
the global economic slide presses central Europe. Hungary is set
for a deep contraction in 2009, while the region's largest
economy Poland is expected to show modest growth.
The Czech finance minister was quoted as saying on Friday
the economy will cool more than expected, conceding that growth
would slip below 2 percent this year. []
Many analysts have warned the Czech Republic could follow
Hungary into recession.
"The Czech crown continued to loose ground as inflows of
bleak economic data both from central Europe and core markets
continued. Hence, it is clear that prospects of the
export-oriented Czech economy are not rosy," KBC wrote on
Friday.
In Austria, the main owner of emerging Europe's No.2 lender
Raiffeisen International <RIBH.VI> said the next two years would
be "very difficult" but that the bank would not abandon the
region. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.103 27.757 -1.23% -4.8%
Polish zloty <EURPLN=> 4.395 4.365 -0.68% -6.37%
Hungarian forint <EURHUF=> 287.22 284.18 -1.06% -8.24%
Croatian kuna <EURHRK=> 7.441 7.441 0% -1.02%
Romanian leu <EURRON=> 4.334 4.329 -0.12% -7.37%
Serbian dinar <EURRSD=> 95.019 94.578 -0.46% -5.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +11 basis points to 130bps over bmk*
4-yr T-bond CZ4YT=RR +10 basis points to +107bps over bmk*
8-yr T-bond CZ8YT=RR -4 basis points to +93bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +762bps over bmk*
5-yr T-bond HU5YT=RR -18 basis points to +704bps over bmk*
10-yr T-bond HU10YT=RR -16 basis points to +519bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1112 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Andy Bruce)
