(Updates throughout, changes dateline)
BUDAPEST, Oct 28 (Reuters) - Poland's zloty jumped four
percent against the euro and the Hungarian forint was close
behind on Tuesday, benefiting from a rebound in stock markets in
the world and optimism over an IMF rescue deal for Budapest.
The region's markets, however, remained volatile as the
governments of emerging economies in Europe fought to contain
the fallout from the global financial crisis on their markets
and economies.
"Lower risk aversion is clearly visible on the market,
however, I would expect further waves of sell-off that will push
the zloty lower," a foreign exchange dealer at one of the Warsaw
based banks said.
The zloty strengthened as far as 3.679 per euro from
Monday's close of 3.716 despite a credit outlook downgrade for
Poland by Standard & Poor's [].
Poland's government confirmed on Tuesday the country wanted
to join the euro zone in 2012, though many economists are
sceptical whether it could meet that target.
Hungary's government announced further budget deficit and
state spending cuts to meet the conditions of a financial rescue
package from the International Monetary Fund (IMF) but also said
the economy may slide into recession next year [].
News of the IMF package continued to bolstered the battered
forint <EURHUF=> and it firmed 3.29 percent to 262.85, after
hitting record lows against the euro last week.
"If the IMF package is finalised, the forint may firm past
260," one Budapest-based dealer said. "But it would be early to
take it for granted that the jitters are over; we don't know how
long the current positive sentiment will last."
Polish government bond yields dropped as the government's
timetable for euro adoption supported prices but investors
remained cautious and market turnover was low.
"The euro timetable helped the bonds somewhat, especially on
the longer end of the curve, because it shows the government is
pushing the matter forward," said Maciej Slomka, chief dealer at
Pekao Bank in Warsaw.
Hungarian bonds moved sideways, though demand increased
slightly in the illiquid market, and short-term yields at around
13 percent still price in further central bank rate hikes after
a three percentage point hike to 11.5 percent last week.
"It seems the IMF cares about (having a stronger) currency,
and they don't really care for (lower) interest rates," one
trader said.
Central European stocks also surged, with Hungary's BUX
<> rising by about 8.5 percent and Poland's WIG20 <>
gaining 3.5 percent.
In other markets, Romania's leu currency <EURRON=> also
firmed, in line with the regional trend, gaining 0.86 percent to
3.706 versus the euro, though Standard & Poor's cut the
country's foreign debt to "junk" status on Monday.
The Czech crown edged up 2.29 percent to 24.195 against the
euro in thin trading due to a bank holiday in Prague.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.195 24.763 +2.29% +8.69%
Polish zloty <EURPLN=> 3.679 3.831 +3.97% -2.18%
Hungarian forint <EURHUF=> 262.85 271.8 +3.29% -3.95%
Croatian kuna <EURHRK=> 7.205 7.187 -0.25% +1.66%
Romanian leu <EURRON=> 3.706 3.738 +0.86% -3.51%
Serbian dinar <EURRSD=> 84.84 84.897 +0.07% -7.72%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +21 basis points to 196bps over bmk*
5-yr T-bond CZ5YT=RR -18 basis points to +186bps over bmk*
10-yr T-bond CZ9YT=RR +18 basis points to +172bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -43 basis points to +461bps over bmk*
5-yr T-bond PL5YT=RR -22 basis points to +427bps over bmk*
10-yr T-bond PL10YT=RR -39 basis points to +350bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +1054bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +953bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +685bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1746 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters buros; Writing by Dagmara
Leszkowicz/Sandor Peto)
