(Updates throughout, changes dateline.)
BUDAPEST, Aug 27 (Reuters) - Central European currencies
rebounded on Friday, pulled along by the Polish zloty which
firmed as second-quarter economic growth data underpinned
expectations for one more central bank interest rate hike.
Early on Friday most currencies in the region eased amid
concern over the possible impacts of Russia's conflict with
Georgia and an economic slowdown in Western Europe, the main
market for Central European exports.
But most of them changed direction later, tracking the zloty
<EURPLN=>, the region's best-performing currency this year,
which by 1412 GMT firmed 0.6 percent to 3.328 to the euro,
lifted by second-quarter economic growth data.
Poland's economy grew by 5.8 percent in annual terms, down
from 6.1 percent in the first quarter, but above analysts' 5.6
percent consensus forecast.
"Along with growing inflation, rising prices of services and
the still strong labor market, it is another indicator that
should keep the central bank vigilant for the moment," said
Maria Hermanova, analyst at Ceska Sporitelna.
Though growth is seen slowing down later this year, analysts
expect the figures to strengthen hawks in the central bank who
argue for a further rate hike to add to the eight already made
hikes since April 2007. Its key interest rate stands at 6
percent.
The forint<EURHUF=>, which fell earlier this week due to
concerns over stability of Hungary's minority government, firmed
1.03 percent to 236.20 against the euro by its domestic market
close, and Hungarian government bond prices also rose.
Dealers said the markets would watch a meeting of the
liberal Free Democrats at the week-end whose votes the
Socialist-led government needs in parliament for the tax and
budget laws to pass.
Traders said they would also watch the impact of tropical
storm Gustav on U.S. oil and gas output.
"If crude prices rise above $120 (per barrel), that would be
no good news for the region (Central European assets)," one
Budapest-based fixed income trader said.
The Czech crown<EURCZK=> bucked the regional trend and fell
by 0.23 percent versus the euro to 24.731 as central bank
Governor Zdenek Tuma said Czech companies faced difficulties,
comments whixch added to concerns over the economy.
Dealers expect further weakening, but see 24.800 as a strong
resistance level.
"Overall, activity was down today," said a Prague foreign
exchange trader. "It is the end of the month and close to a
(U.S.) holiday, and investors are squaring positions."
*************************MARKET SNAPSHOT********************
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.731 24.675 -0.23% +6.66%
Polish zloty <EURPLN=> 3.328 3.348 +0.6% +7.57%
Hungarian forint <EURHUF=> 236.200 238.650 +1.03% +6.58%
Croatian kuna <EURHRK=> 7.148 7.155 +0.1% +2.44%
Romanian leu <EURRON=> 3.528 3.537 +0.25% +1.46%
Serbian dinar <EURRSD=> 76.200 76.470 +0.35% +3.25%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to -2bps over bmk*
5-yr T-bond CZ5YT=RR +1 basis points to +5bps over bmk*
10-yr T-bond CZ10YT=RR -6 basis points to +32bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -11 basis points to +466bps over bmk*
5-yr T-bond HU5YT=RR -14 basis points to +433bps over bmk*
10-yr T-bond HU10YT=RR -13 basis points to +359bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1612 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters buros, writing by Sandor Peto; Editing
by Gerrard Raven)
