(Updates throughout)
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, Jan 23 (Reuters) - The Hungarian forint
fell to an all-time low on Friday and the Polish zloty slid to
its weakest level since September 2004 as investors' sentiment
toward emerging Europe continued to sour.
The Czech crown <EURCZK=> weakened past 28 per euro for the
first time since August 2007 in early trade, triggering stop
losses that added to its 1 percent fall, dealers said.
[]
Only Romania's leu <EURRON=> and Croatia's kuna <EURHRK=>
firmed but the two countries' central banks probably sold
hundreds of millions of euros in the market to prop them up,
dealers said.
The forint <EURHUF=> hit new record lows at 291.30 to the
euro but rebounded to 289.05 by 1432 GMT, still weaker by 1.68
percent from Thursday.
Apart from the general negative sentiment, the currency was
hurt by market rumours which generated speculation, including an
unconfirmed report that an international rating agency may
downgrade Hungary.[]
Risk aversion increased in global markets, putting equities
and emerging market assets including government bonds under
pressure, on economic growth worries fuelled further by British
data which confirmed that the economy had gone into recession.
Poor economic data in the past weeks has pointed to a sharp
slowdown in central Europe's ex-communist economies as demand
from the euro zone collapses, and policymakers across the region
have said they would slash growth forecasts further.
Central banks have cut interest rates to counter sagging
growth outlooks and are expected to ease further, putting more
pressure on currencies already hurt by investors cashing out of
emerging markets.
"The whole region is beaten up, the Polish zloty also fell,
and what is bad for them, they will also have a central bank
meeting next week (where interest rates are seen being cut),"
one fixed income trader said.[]
The Polish zloty <EURPLN=> shed 1.78 percent to 4.444 per
euro, and the Czech crown <EURCZK=> fell 1.33 percent to 28.131.
"It's already clear that the next quarter or two are set to
be unfavourable for CZK, analysts at Komercni Banka said in a
note. "As a result, we will take advantage of any correction to
set up a new long EUR/short CZK position, as we see EUR/CZK
approaching 29.00 by the middle of this year."
The Czech finance minister was quoted as saying on Friday
that growth would slip below 2 percent this year. []
But the Croatian kuna firmed 0.69 percent to 7.39 per euro
and the Romanian leu gained 0.93 percent to 4.289.
Croatia's central bank said it sold 328.3 million euros to
banks at an average rate of 7.4011.[] Dealers said
Romania's central bank also backed the leu in its largest
intervention so far this year.[]
"It sold 300-400 million euros," a Bucharest-based dealer
said.
Weaker currencies can help exporters hit by recession in
their European markets, but in some countries in the region,
like Hungary, excessive weakness can lead to a default of many
foreign currency borrowers.
But central bank intervention from currency reserves would
be a risky strategy in Hungary's markets where speculation often
boosted turnovers in the past years.
"It would be a suicide, an invitation for speculation
against the forint," one dealer said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.131 27.757 -1.33% -4.9%
Polish zloty <EURPLN=> 4.444 4.365 -1.78% -7.4%
Hungarian forint <EURHUF=> 289.05 284.18 -1.68% -8.82%
Croatian kuna <EURHRK=> 7.39 7.44 1 +0.69% -0.34%
Romanian leu <EURRON=> 4.289 4.32 9 +0.93% -6.4%
Serbian dinar <EURRSD=> 95.02 94.578 -0.47% -5.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +16 basis points to +135bps over bmk*
4-yr T-bond CZ4YT=RR +4 basis points to +101bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +109bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +813bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +753bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +574bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1532 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Andy Bruce)
