* Currencies weaker, mkts await Fed decision
* Polish zloty level satisfactory-cbank governor
* Czech govt seen winning confidence vote
* Hungary, Romania CPI data awaited on Wednesday
(Adds detail on Wednesday's CPI releases)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Aug 10 (Reuters) - Central European
currencies and stocks fell on Tuesday in thin trade amid
uncertainty about how appetite for riskier assets would be
affected by the outcome of a U.S. Federal Reserve meeting.
In the Czech Republic the new centre-right government looked
certain to win a confidence vote in the lower house later on
Tuesday, paving the way for it to push tough budget cuts and
reforms through parliament. []
Investors, however, stood on the sidelines, unsure how the
Fed meeting would affect global markets given expectations the
central bank could adopt additional measures to prop up a
softening recovery in the United States.
At 1350 GMT, the Czech crown <EURCZK=>, the Romanian leu
<EURRON=> and the Polish zloty <EURPLN=> were 0.1-0.2 percent
weaker, while the Hungarian forint <EURHUF=> was down 0.5
percent.
The zloty briefly touched a three-month peak and the forint
hit a two-week high within the session, but moves were
exacerbated by thin trade and could not decisively break recent
ranges. Stocks were 1-2 percent down in line with Western peers.
On Wednesday, key inflation data in Hungary and Romania will
likely show two opposite trends.
In Romania, a recent 5 percentage point VAT hike is seen
triggering a spike in annual inflation to 7.3 percent in July,
from 4.4 percent in June, according to a Reuters poll. A higher
number would probably cause a surge in longer-term yields on the
country's usually dormant bond market. <RO/POLL1>
In Hungary, inflation is expected to show a marked slowdown
to 3.7 percent due to fading effects of a July 2009 VAT hike.
<HUCPIY1>
"Just from a visual point of view, seeing inflation below 4
percent could prompt some people to buy," one Budapest-based
trader said. "But the focus is on the Fed now."
Hungary's government revised its 2010 GDP forecast on
Tuesday to 0.6 percent growth from a 0.2 percent contraction
[]. Romania, the Czech Republic, Hungary and
Bulgaria publish second-quarter GDP data on Friday.
ZLOTY SATISFACTORY
The Polish central bank's governor Marek Belka said on
Tuesday the zloty's current level was satisfactory and if
anything threatened the Polish unit, it was sharp appreciation
rather than depreciation. []
The zloty has swung back and forth in recent months. The
central bank intervened to counter its strength in April, while
there were reports in May that the finance ministry had sold
euros on the market to stop it falling sharply.
The zloty has long been regarded as a regional outperformer,
but it has failed to establish a steady appreciation, being one
of the most sensitive currencies to changes in risk appetite.
Polish and Hungarian bonds were stable on Tuesday, with
investors eying Hungary's switch tender due on Wednesday.
"That, along with a regular bond auction on Thursday, is
likely to put supply-side pressure on the market, especially on
the long end," a dealer in Budapest said."
A three-month Hungarian T-bill tender on Tuesday saw the
average yield dropping 10 basis points from a week ago.
[]
Central European government finances have come under closer
scrutiny after Hungary suspended talks with the International
Monetary Fund last month, while worries remain over Romania's
IMF-mandated austerity measures.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.75 24.727 -0.09% +6.34%
Polish zloty <EURPLN=> 3.98 3.972 -0.2% +3.12%
Hungarian forint <EURHUF=> 279.44 278 -0.52% -3.25%
Croatian kuna <EURHRK=> 7.212 7.219 +0.1% +1.35%
Romanian leu <EURRON=> 4.234 4.229 -0.12% +0.08%
Serbian dinar <EURRSD=> 104.89 105.39 +0.48% -8.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 104bps over bmk*
7-yr T-bond CZ7YT=RR -11 basis points to +105bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +112bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +405bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +387bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +329bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +582bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +536bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +457bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1450 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
and Marius Zaharia; Editing by Andrew Heavens and Susan Fenton)
