* Global banks' aid package lifts FX, banking stocks
* FX weaken by late trade on U.S., South Africa news
* EU leaders prepare for weekend summit
(Adds new price, new paras 5, 8, 11, 19.)
By Jason Hovet
BUDAPEST/PRAGUE, Feb 27 (Reuters) - Central European
currencies edged lower on Friday, giving up early gains coming
from news global development banks will launch a coordinated
plan to shore up the region's banks and businesses.
Currencies have come under heavy pressure this month, pushed
to multi-year or record lows on concern over sinking growth,
some countries' strong reliance on external financing and the
health of banks.
Three development banks launched a coordinated two-year plan
to lend up to 25 billion euros ($31.7 billion) to bolster
central and eastern European banks and businesses whose woes
have also rattled investors' nerves in the West. []
The news gave an early boost to the region's currencies
which have seen losses of 5-12 percent in 2009, but news the
U.S. government was taking a larger common equity stake in
Citigroup <C.N> shifted market sentiment, fuelling a fall in
shares. []
Risk aversion also increased on news that the U.S. economy
contracted by 6.2 percent in annual terms in the fourth quarter
and a plunge in the rand <ZAR=D3> after South Africa said its
trade deficit swelled. [] []
"There might be a bit of profit taking," said Stuart
Bennett, currency strategist with Calyon.
"There may be a realisation that 25 billion euros (for
central and eastern Europe)... does help, but there is concern
on the market that it is not enough because we don't really know
what is enough."
European Union leaders will meet on Sunday to discuss the
global crisis but no new major initiative is seen.
[]
By 1451 GMT, the forint <EURHUF=> had inched down 0.5
percent to 301.36 to the euro. The Czech crown <EURCKZ=> lost
0.4 percent and the Polish zloty <EURPLN=> fell 0.3 percent from
Thursday closing levels.
Romania's leu <EURRON=> was off 0.3 percent at 4.298 per
euro, having outperformed peers in recent weeks due to worries
over central bank intervention.
"I expect the central bank to intervene (on Monday), like it
has been doing on a regular basis for the past several months,"
one Bucharest-based dealer said.
Banks trimmed stock gains to send indices lower, while Czech
bonds were slightly firmer. Hungarian government bonds gave up
most of their early gains by late trade.
In Hungary, the prime minister called for a 180 billion euro
aid package for eastern European economies, banks and firms to
counter the downturn. []
MORE WEAKNESS FEARED
However, analysts have warned the aid itself will not solve
the region's problems and that fundamentally currencies are set
for more weakness, which will complicate efforts by some central
banks to cut interest rates.
"They have to care about the external value of currencies as
well," Commerzbank senior FX strategist Lutz Karpowitz said.
Poland cut interest rates to 4.0 percent this week, but by a
smaller amount than in three previous moves. Hungary left
interest rates unchanged on Monday to keep financial stability.
Central Europe is fast becoming one of the hardest hit
regions in the global economic turmoil.
Sinking currencies have raised costs for Hungarian, Romanian
and Polish borrowers that went after foreign currency loans in
recent years.
The lending plan -- drawn up by the World Bank, European
Bank for Reconstruction and Development and European Investment
Bank -- will speed delivery of financing to business suffering
under the downturn. [] []
"You are happy if you get a present, of course, but if in
the end you find that its not bigger than a matchbox, your
spirits will go lower," one Budapest-based currency deal said.
The recent sell-off has hit the entire region, but
policymakers have been pushing to point out fundamental
difference in their respective countries, and Poland's central
bank chief said his country stands out among emerging countries.
Analysts view Poland and Czech Republic as being in better
position to manage the global downturn than states like Romania
or Hungary, which have ran higher current account
deficits.[]
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.226 28.11 -0.41% -5.22%
Polish zloty <EURPLN=> 4.698 4.682 -0.34% -12.41%
Hungarian forint <EURHUF=> 301.36 299.76 -0.53% -12.55%
Croatian kuna <EURHRK=> 7.42 7.35 -0.94% -0.74%
Romanian leu <EURRON=> 4.298 4.285 -0.3% -6.6%
Serbian dinar <EURRSD=> 93.679 93.73 +0.05% -4.48%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -16 basis points to 222bps over bmk*
4-yr T-bond CZ4YT=RR +42 basis points to +257bps over bmk*
8-yr T-bond CZ8YT=RR +29 basis points to +321bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -15 basis points to +1149bps over bmk*
5-yr T-bond HU5YT=RR -51 basis points to +998bps over bmk*
10-yr T-bond HU10YT=RR -39 basis points to +806bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 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/Sandor
Peto)
