* FX ends two-day rally
* Stocks fall, led by banks
* Effects of Polish EU funds fade, PM says zloty stable
* Eyes turn to Hungarian cbank on Monday
(Updates prices, adds Romania budget, details)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Feb 20 (Reuters) - Central European
currencies slipped on Friday, capping a rollercoaster week that
brought heavy pressure as concerns rose over the region's
sinking economies and exposure to foreign debt.
Poland's zloty steadied after a two-day rally and Prime
Minister Donald Tusk said it had stabilised for now and its
worse losses were likely over.
The currency clawed back some way of a more than 5 percent
drop on Monday and Tuesday []. But as the worst
performing emerging currency against the euro this year, it
ended 0.6 percent lower on the day and 2.1 percent down versus
the euro on the week.
Poland has also been hurt by losses for companies who bet on
the zloty when it was at record highs in the summer. The zloty
has lost almost 30 percent since Sept. 1 -- most in the region.
Markets got a mild mid-morning boost from a World Bank
report giving the chance that some emerging European Union (EU)
members will avoid recession.
But it said forecasts were still clouded with uncertainty
[], and investors stayed wary of riskier emerging
assets due to more signs of a slumping global economy.
"We have been relatively stable, and there is no real
momentum now," said emerging markets strategist Mats Olausson at
SEB bank. "The next big move could be in a weaker direction for
the region's currencies, much weaker."
EU Economic Affairs and Monetary Affairs Commissioner
Joaquin Almunia said on Friday the EU was helping eastern
European economies hit by the global downturn. []
He called on private investors to support their investment
there, speaking in response to questions about a possible rescue
package for eastern European countries.
Concerns over external financing and banks' health pounded
the region this week, sparked by ratings warnings. On Friday, a
Moody's analyst said Austria's debt rating is not under pressure
from its banks' exposure to the region. []
The Polish prime minister said on Friday the zloty has
stabilised for now and its worst losses are likely over. It
neared an all-time low at around 4.93 per euro on Tuesday.
[] By 1612 GMT, it was bid at 4.76 to the euro, down
0.6 percent from Thursday's domestic close.
UNDER PRESSURE
Markets opened lower after poor U.S data on Thursday, and
stock markets pared losses to end 1-3 percent down as banks
stayed in focus after Poland's biggest bank Pekao <BAPE.WA>
reported on Friday it made higher-than-expected provisions.
Currencies rebounded, with the Czech crown <EURCZK=> steady
at 28.785, but Hungary's forint <EURHUF=> slid 0.8 percent.
The Romanian leu <EURRON=> lost 0.4 percent. Romania's
parliament approved the 2009 budget bill that also includes a
set of crisis-fighting measures. []
In Serbia, the prime minster said he expected to conclude a
2 billion euro ($2.52 billion) loan with the International
Monetary Fund by April as growth slows. []
The Serb dinar <EURRSD=> was down 0.4 percent on the day.
Officials in Poland, Czech Republic and Hungary have moved
to talk up currencies after the strong pace of falls, and many
strategists have said the falls were overshot. [].
"The region's currencies may have already reached
undervalued territories... But in the short term, uncertainty
over the banking sector, possible local or parent bank
downgrades can be in the focus, and central bank policy on the
other hand," said Barbara Nestor, emerging markets strategist at
Commerzbank in London.
The region has been hammered by recession fears, forcing
central banks into an easing monetary cycle. But a crisis of
confidence in eastern Europe looks likely to make the region's
central banks halt or reverse cuts in interest rates.
Hungarian bonds fell before Monday's central bank meeting.
"I don't know what the central bank could do, hiking
interest rates would make no sense, they would need a very big
hike for making anything change," a fixed income trader said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.785 28.83 +0.16% -7.06%
Polish zloty <EURPLN=> 4.76 4.732 -0.59% -13.55%
Hungarian forint <EURHUF=> 304.86 301.89 -0.97% -13.55%
Croatian kuna <EURHRK=> 7.481 7.47 -0.15% -1.55%
Romanian leu <EURRON=> 4.283 4.265 -0.42% -6.27%
Serbian dinar <EURRSD=> 95.076 94.737 -0.36% -5.89%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +27 basis points to 217bps over bmk*
4-yr T-bond CZ4YT=RR -27 basis points to +204bps over bmk*
8-yr T-bond CZ8YT=RR -14 basis points to +300bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +13 basis points to +451bps over bmk*
5-yr T-bond PL5YT=RR +15 basis points to +383bps over bmk*
10-yr T-bond PL10YT=RR +22 basis points to +323bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +42 basis points to +1211bps over bmk*
5-yr T-bond HU5YT=RR +47 basis points to +1474bps over bmk*
10-yr T-bond HU10YT=RR +22 basis points to +898bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1714 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia, editing by Victoria Main)
