* FX stable, seeking direction after rally pauses
* Markets start considering next week's rate moves
By Marius Zaharia
BUCHAREST, July 30 (Reuters) - Central European currencies
were stable early on Thursday, looking to global stock markets
for fresh direction after a pause in a rally that has seen most
hit multi-month highs.
Gains in stocks have driven regional currencies higher this
month, but they eased back this week as worries over widening
budget deficits and poor GDP data in Lithuania gave markets a
cold shower.
At 0720 GMT, the Polish zloty <EURPLN=> and the Czech crown
<EURCZK=> were virtually unchanged from the previous close, the
Romanian leu <EURRON=> was up 0.1 percent, while the Hungarian
forint <EURHUF=> was 0.4 percent stronger.
"We could see some short squeeze in emerging markets in the
last few days," a Prague dealer said. "But it was only a short
squeeze and we could continue in some strengthening as stocks
are still bid."
"We could at least test previous highs," the dealer added.
In Poland, where the zloty has gained about 6 percent this
month, a central banker said he expected the economy to grow in
the second and third quarter [], highlighting the
outperformance of the recession-hit region's biggest economy.
In Hungary, final May trade data showed a surplus slightly
below a preliminary estimate. []
Markets are also beginning to consider rate decisions in
Czech Republic and Romania next week. Analysts are split whether
another cut could be on the cards in Czech Republic
[] and expect a 50 basis point cut in Romania.
Poland held rates steady as expected on Wednesday, while
Hungary surprised markets with a 100 basis point cut on Monday
that was twice as much as expected.[] []
Successful debt tenders in Poland and Hungary this month
showed a significant improvement in the financing conditions
that have worried the region since last year, but analysts are
starting to question if recent currency gains match fundamentals.
Top of the agenda now are worsening budgets across the
region, a spillover from a potential currency devaluation in the
Baltics and the fragility of a banking system burdened with high
foreign debt.
On Thursday, Erste Bank <ERST.VI>, which is the biggest
lender in Romania, Slovakia and Czech Republic said it was
profitable in all its emerging European markets, except for its
small bank in Ukraine. []
Trading income helped Erste offset a sharp rise in bad debt
provisions, which many analysts say are yet to reach their peak
in the region.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.562 25.565 +0.01% +4.66%
Polish zloty <EURPLN=> 4.181 4.18 -0.02% -1.58%
Hungarian forint <EURHUF=> 268.33 269.32 +0.37% -1.78%
Croatian kuna <EURHRK=> 7.345 7.342 -0.04% +0.27%
Romanian leu <EURRON=> 4.207 4.212 +0.12% -4.58%
Serbian dinar <EURRSD=> 93.08 93.27 +0.2% -3.87%
All data taken from Reuters at 1020 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 emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Patrick Graham)
