* Zloty reverses on data as FX hold steady
* Crown near levels seen before rate cut talk started
* Polish 2-year bonds firm after auction
(Updates with Polish data, tender)
By Jason Hovet
PRAGUE, Nov 10 (Reuters) - The Polish zloty erased early
losses after a smaller-than-expected current account gap on
Tuesday, as central European currencies mostly held on to recent
gains and analysts saw risks of a weakening trend fading.
Currencies have been slow to win back losses from September
and October, though dealers said firming could continue on
dollar weakness that has boosted risk appetite along with some
signs of economic improvement in hard-hit emerging Europe.
Hungary's forint <EURHUF=> was the only currency to give
back gains on Tuesday, slipping 0.2 percent from the previous
close to 271.63 to the euro.
The Czech crown <EURCZK=> was up a touch at 25.485 per euro
after lagging 1 percent gains in the region on Monday.
The Polish zloty <EURPLN=> firmed in the afternoon to bid up
0.2 percent on the day at 4.185 to the euro by 1419 GMT,
supported by a narrower-than-expected September current account
deficit. []
Two-year bonds firmed after the finance ministry sold 5
billion zlotys of its 2-year bonds due 2012. []
"It's definitely the data that strengthened the zloty," said
Jakub Wiraszka, dealer at BRE bank in Warsaw.
Poland has been the only central European economy to avoid
recession on the back of a larger domestic base, and analysts
said Tuesday's data also showed better exports.
Analysts expect the road back to economic recovery in
central Europe will be slow despite signs of economic renewal.
In Romania, the leu <EURRON=> has been held back by dragging
political uncertainty as Romania's new prime minister designate
Liviu Negoita moves to form a government that analysts give
little chance of winning parliamentary support.
Negoita unveiled a cabinet line-up on Monday in the hope of
ending a month-long political crisis. [] The leu on
Tuesday hovered on the strong side of 4.30 per euro where it has
clung to throughout the more than month-long political haggling.
RETURN TO FIRMING
Hungary's forint is 2.8 percent weaker from its 2009 high
hit in October. The zloty is 0.8 percent off since September.
But both currencies have gained 1 percent this month, while
the crown is up 4 percent since the central bank narrowly voted
not to cut interest rates last week against some expectations.
"The picture is now turning back towards more risk-taking
again after a stream of better-than-expected U.S. macro data and
renewed commitment on the part of global policymakers to
continue to pump liquidity into global financial markets,"
Danske Bank said.
"We therefore call an end to the correction in the EMEA
FX markets -- at least for now."
The Czech unit is already near levels seen at the end of
September before the central bank governor Zdenek Tuma and his
deputy began speaking in favour of policy easing.
"Speculators may play the CNB indecisiveness story now and
can try how much the board withstands in case of the koruna
strengthening," CSOB said, adding 25 could be a target.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.485 25.535 +0.2% +4.98%
Polish zloty <EURPLN=> 4.185 4.192 +0.17% -1.67%
Hungarian forint <EURHUF=> 271.63 271.05 -0.21% -2.97%
Croatian kuna <EURHRK=> 7.279 7.272 -0.1% +1.18%
Romanian leu <EURRON=> 4.293 4.297 +0.09% -6.49%
Serbian dinar <EURRSD=> 93.9 93.8 -0.11% -4.71%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to 108bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +112bps over bmk*
10-yr T-bond CZ10YT=RR +6 basis points to +100bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +369bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +323bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +285bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +523bps over bmk*
5-yr T-bond HU5YT=RR -9 basis points to +459bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +403bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1520 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Andy Bruce)
