* Forint at 3-wk lows vs euro after cbank comments on economy
* Leu extends losses after panel rejects VAT hike
* Bonds, equities continue to retreat on global mood
* Zloty flat ahead of Polish cbank rate decision
By Sandor Peto and Krisztina Than
BUDAPEST, Aug 24 (Reuters) - East European currencies eased
on Tuesday as global sentiment soured, with the forint leading
losses after Hungary's central bank warned that inflation could
be faster and economic recovery slower than expected.
The forint <EURHUF=> extended Monday's losses, easing 0.56
percent against the euro by 0910 GMT to 283.80, slightly up from
three-week lows hit earlier in the day at 284.80.
The losses in the leu <EURRON=>, meanwhile, deepened
slightly after a Romanian parliamentary committee rejected a
planned rise in value-added tax (VAT) aimed at keeping an aid
programme from the International Monetary Fund on track.
[]
The leu eased 0.24 percent to 4.238 versus the euro.
The Czech crown <EURCZK=> shed 0.3 percent, the zloty
<EUPLN=> was flat at 4.008 ahead of the Polish central bank's
rate decision, and the region's main stock indices were lower by
about 1 percent, reflecting equity losses in developed markets.
Hungary's markets were closed on Friday when global risk
aversion started to rise, and the decline of Hungarian assets on
Monday accelerated after comments from the central bank <NBH)
depicted gloomier prospects for the economy than expected.
The NBH kept its base rate on hold at 5.25 percent but said
the government's commitment to keep the budget deficit within
sustainable limits was key to retaining investors' trust after a
halt in talks with the International Monetary Fund and the EU
last month. []
It warned it may need to hike rates if the inflation outlook
or Hungary's risk assessment worsen. Governor Andras Simor said
he was not aware of any plans to restart talks with the IMF.
"It looks like a bumpy ride ahead of the Oct 3 municipal
elections, with politics placing upside pressure on rates, and
the HUF (forint) essentially dependent on the whims of the
government," Cheuvreux said in its daily note. "We remain
underweight Hungarian equities."
Hungarian government bonds have retreated this week from
3-month highs, yields continued to rise on Tuesday by 5-10
percent, while two-year interest rate swap yields were around
5.90 percent, up 20 basis points from early Monday, which a
trader said was due to markets pricing in gradual rate hikes.
"My interpretation is that this reflects rising concern that
a big rate hike might come, rather than an expectation for a
tightening cycle to begin," the fixed income trader said.
The government sold 50 billion forints worth of 3-month
Treasury bills at an auction as planned <HUAUCTION01>. But the
average yield rose to 5.38 percent from 5.28 percent at an
auction last week.
POLAND TO DECIDE ON RATES
Poland's rate-setting Monetary Policy Council decides on
interest rates <PLINTR=ECI> on Tuesday, and analysts expect the
main rate to stay unchanged at an all-time low of 3.5 percent.
Poland's unemployment <PLUNM=ECI> rate fell to 11.4 percent
in July from 11.6 percent in June, while retail sales rose 3.9
percent year on year in July, below forecasts and down from 6.4
percent in June, data showed on Tuesday. []
The Czech crown also eased with other regional currencies as
investor appetite for risk stayed weak, and was unable to get a
boost from a more hawkish stance among policy makers.
"The prevailing mood on global markets is not bringing
anything good for riskier assets," CSOB analysts said. "The
crown could therefore move beyond 24.80 to the euro."
Czech central banker Eva Zamrazilova was quoted as saying by
newspaper Lidove Noviny on Tuesday that she wanted discussion of
a rise in interest rates very soon.
Czech borrowing costs are at a record low with the main
two-week repo rate at 0.75 percent, after a 25 basis point cut
in May.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.847 24.779 -0.27% +5.92%
Polish zloty <EURPLN=> 4.008 4.01 +0.05% +2.4%
Hungarian forint <EURHUF=> 283.8 282.2 -0.56% -4.74%
Croatian kuna <EURHRK=> 7.273 7.275 +0.03% +0.5%
Romanian leu <EURRON=> 4.238 4.228 -0.24% -0.01%
Serbian dinar <EURRSD=> 105.253 104.92 -0.32%
-8.91%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 108bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +115bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +403bps over bmk*
5-yr T-bond PL5YT=RR +11 basis points to +385bps over bmk*
10-yr T-bond PL10YT=RR +12 basis points to +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +7 basis points to +589bps over bmk*
5-yr T-bond HU5YT=RR +13 basis points to +548bps over bmk*
10-yr T-bond HU10YT=RR +10 basis points to +468bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1110 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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[]
(Reporting by Reuters bureaus; Writing by Krisztina Than/Sandor
Peto; Editing by Hugh Lawson)
