* FX up, forint firms on fiscal plan
* Czech finmin sees reduction of borrowing needs for 2011
* Polish bonds touch stronger after governor's comments
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Sept 10 (Reuters) - Central European currencies were
all in positive territory on Friday, with Hungary's forint
leading gains, and dealers said the unit was likely to continue
firming on the back of the government's ambitious
deficit-cutting plans.
Hungary's commitment on Wednesday to cut next year's budget
deficit to below the European Union's 3 percent ceiling lifted
demand at Thursday's bond auction and sent the country's bond
yields some 18-28 basis points lower after the tender.
[]
"Hungary's plan to cut its budget deficit is very positive
news for the forint, but I think the market has still not fully
digested it due to conflicting communication by the government,"
said Ulrich Leuchtmann, analyst at Commerzbank in Frankfurt.
"That's why I think there's still scope for the forint to
appreciate further because of the fiscal plan," he added.
The budget announcement was a complete U-turn for Viktor
Orban's government, which had for months turned its back on
outside aid and eschewed budget austerity.
But months of communication gaffes and attempts to wiggle
out of commitments by Orban's cabinet mean markets will retain
some scepticism until they see concrete steps, analysts say.
[].
By 0933 GMT, Hungary's forint <EURHUF=> was 0.4 percent
stronger at 283.50 per euro, and dealers said the next key level
for the currency is around 282.50.
"If the Swissie and the dollar remain calm and there are no
botched comments from the Hungarian government, the forint can
slowly edge toward 280, probably toward the end of next week,"
one Budapest-based dealer said.
The Polish zloty <EURPLN=> was a touch stronger against the
euro, while the Czech crown <ERUCZK=> and Romania's leu
<EURRON=> gained 0.2 percent and 0.1 percent, respectively.
The forint has lost some 5.0 percent of its value since the
start of the year. By contrast, the Czech crown <EURCZK=> has
gained more than 7 percent in the same period and the Polish
zloty <EURPLN=> has added some 4.5 percent.
CBANKER LIFTS BONDS
Polish bonds were a touch stronger after central bank
Governor Marek Belka said he did not expect a big jump in
inflation and that the consumer price index was likely to reach
the central bank's 2.5 percent target and then stabilise early
next year. []
"The market is a touch stronger after Belka's comments,"
said Krzysztof Izdebski, fixed income dealer at PKO BP.
Inflation in July slowed to 2.0 percent on an annual basis
but analysts expect it to accelerate to around 2.7 percent at
the end of 2010 due to higher food prices and base effects.
Data released on Friday showed inflation slowed to 3.7
percent on an annual basis in Hungary last month, while in
Romania it quickened to 7.6 percent, but the readings had
limited impact on currencies. [] []
Elsewhere, the Czech Finance Minister told Reuters the
country would cut its 2011 borrowing needs to 250-270 billion
crowns from 280 billion crowns planned previously.
[]
The Czech borrowing needs this year are at a record 280
billion crowns due to a public sector deficit that has been
pushed out to 5.3 percent of gross domestic product (GDP) in the
aftermath of the global financial crisis.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.659 24.702 +0.17% +6.73%
Polish zloty <EURPLN=> 3.929 3.933 +0.1% +4.45%
Hungarian forint <EURHUF=> 283.49 284.6 +0.39% -4.64%
Croatian kuna <EURHRK=> 7.281 7.284 +0.04% +0.39%
Romanian leu <EURRON=> 4.27 4.275 +0.12% -0.76%
Serbian dinar <EURRSD=> 104.75 104.87 +0.11% -8.47%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +90bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +91bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +396bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +387bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +314bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1133 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Writing by Dagmara Leszkowicz;
Editing by Toby Chopra and Susan Fenton)
