* Risk appetite helps region, zloty singled out as best bet
* Czech, Polish PMI at 2-yr high, Hungary PMI inches lower
* Bonds gain, Hungarian papers near multi-year highs
* Leu underperforms as c.bank seen intervening in mkt
(Recasts throughout)
By Gergely Szakacs and Marton Dunai
BUDAPEST, April 1 (Reuters) - Poland's zloty hit a 16-month
high against the euro on Thursday as strong risk appetite and an
improving economic outlook lifted currencies and bonds across
central Europe.
The zloty <EURPLN=> rose 0.3 percent against the euro by
1017 GMT as investors bought the assets of Poland, the European
Union's only economy to have avoided recession in 2009.
The Polish currency was expected to lend strength to assets
across the region. []
The Hungarian forint <EURHUF=> added 0.4 percent, but
followed the zloty's lead, dealers said. The Czech crown
<EURCZK=> firmed 0.3 percent against the euro.
"Market sentiment towards emerging markets and especially
Poland is good," said an FX trader in Warsaw. "Poland's
(situation) is relatively good compared with other emerging
economies and it shines like a gem in the region."
Poland's Purchasing Managers' Index (PMI) reached a 25-month
high in March, indicating a steady recovery, although analysts
pointed out the index was lower than expected. []
"The difference is most visible if compared to the very good
reading of the euro zone's PMI," said Arkadiusz Krzesniak, chief
economist at Deutsche bank in Warsaw. "It may mean that the
recovery in Poland is now entering a much slower pace."
Czech PMI also hit a 2-year high, but Czech analysts also
warned that recovery will be far from smooth. []
Hungary's data showed a slight decline but remained in positive
territory. []
Romania's leu <EURRON=> underperformed, shedding 0.3 percent
after a deputy central bank governor said economic fundamentals
did not justify further firming. []
The central bank has signalled concerns this month that a
stronger leu would hurt exporters and the economic recovery.
Dealers said a jump in FX reserves in March reflected IMF/EU
money, but also central bank interventions. The bank never
comments on interventions, which dealers say happen routinely.
"The central bank is intervening indirectly," a Bucharest
dealer said. "They've bought a lot of euros today and yesterday
through local banks."
BONDS GAIN DESPITE POLISH CONCERNS
Bonds gained across the region as investors continued buying
emerging Europe's debt, betting that it had a more favourable
outlook than some countries on the fringes of the euro zone.
In Hungary, where debt supply has been particularly low and
local demand relatively strong, yields continued to attack
five-year lows at the short end and more than 2-year lows on the
longer end, a dealer said.
"The strengthening continues," he said. "Shorters close
positions while long positions are opened."
Czech bonds also gained, with the yield on the 10-year bond
near its 2010 low, after data showed the 2009 budget deficit was
lower than previously estimated. []
Polish bonds have also gained recently despite concerns
voiced by the central bank over the breadth of the recovery in
central Europe's largest economy. []
The bank kept its main lending rate at a record low of 3.5
percent on Wednesday.
Dealers played down the market significance of a clash
between central bank Governor Slawomir Skrzypek, some Monetary
Policy Council (MPC) members and the government over the bank's
2009 profit. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.349 25.415 +0.26% +3.82%
Polish zloty <EURPLN=> 3.845 3.857 +0.31% +6.74%
Hungarian forint <EURHUF=> 264.57 265.55 +0.37% +2.18%
Croatian kuna <EURHRK=> 7.27 7.27 0% +0.54%
Romanian leu <EURRON=> 4.106 4.094 -0.29% +3.2%
Serbian dinar <EURRSD=> 99.398 99.69 +0.29% -3.54%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +1 basis points to +69bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +92bps over bmk*
10-yr T-bond CZ10YT=RR -4 basis points to +89bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +353bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +297bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +242bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +458bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +388bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +669bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1217 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; writing by Gergely Szakacs;
editing by Stephen Nisbet)
