* Forint gains on well-bid debt
* Romania to press IMF for leniency on deficit
* Other FX stable, budget worries weigh
* Markets start considering next week's rate moves
By Marius Zaharia
BUCHAREST, July 30 (Reuters) - Hungary's forint firmed on
Thursday, driven by another successful round of debt tenders,
while other central European currencies were stable, with the
impact of stock gains offset by ongoing budget concerns.
Hungary sold more than planned at its three auctions on
Thursday, which were all oversubscribed [].
"The forint firmed because of the (bond) auctions, probably
foreign investors subscribed," one Budapest-based dealer said.
At 0935 GMT, regional bourses were up to 1.5 percent,
tracking moves across Europe. Gains for global equities markets
have driven regional currencies higher this month, but they
eased back this week as worries over widening budget gaps and
poor GDP data in Lithuania gave markets a cold shower.
A government official told Reuters on Thursday that Romania
will ask the IMF to allow it to run a budget gap of up to 7
percent of GDP, compared with a previous 4.6 percent target,
reminding markets of this regional weakness [].
The Polish zloty <EURPLN=> and the Czech crown <EURCZK=>
were virtually unchanged from the previous close, the Romanian
leu <EURRON=> was up 0.3 percent, while the Hungarian forint
<EURHUF=> was 0.6 percent stronger. Bond markets were quiet.
"Currencies suffer from profit-taking, which was triggered
by budget worries and Lithuania," one dealer in Bucharest said.
Besides Romania, the Czech Republic and Poland are both
struggling to contain budget deficits [] and
analysts say an attempt to tighten their fiscal strings will
burden a potential economic recovery.
Hungary is seen in a better position to control spending and
expects a lower budget gap than in the other major economies in
the region which have a floating exchange rate.
RATE MOVES IN FOCUS
Markets are also beginning to consider rate decisions in
Czech Republic and Romania next week. Analysts are split whether
another cut could be on the cards in Czech Republic
[] and expect a 50 basis point cut in Romania.
Poland held rates steady as expected on Wednesday, while
Hungary surprised markets with a 100 basis point cut on Monday
that was twice as much as expected.[] []
In Poland, where the zloty has gained about 6 percent this
month, a central banker said he expected the economy to grow in
the second and third quarter [], highlighting the
outperformance of the recession-hit region's biggest economy.
In Hungary, final May trade data showed a surplus slightly
below a preliminary estimate. []
Successful debt tenders in Poland and Hungary this month
showed a significant improvement in the financing conditions
that have worried the region since last year, but analysts are
starting to question if recent currency gains match fundamentals.
As well as budgets, top of the agenda is spillover from a
potential currency devaluation in the Baltics and the fragility
of a banking system burdened with high foreign debt.
On Thursday, Erste Bank <ERST.VI>, which is the biggest
lender in Romania, Slovakia and Czech Republic said it was
profitable in all its emerging European markets, except for its
small bank in Ukraine. []
Trading income helped Erste offset a sharp rise in bad debt
provisions, which many analysts say are yet to reach their peak
in the region.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.568 25.565 -0.01% +4.63%
Polish zloty <EURPLN=> 4.175 4.18 +0.12% -1.44%
Hungarian forint <EURHUF=> 267.74 269.32 +0.59% -1.56%
Croatian kuna <EURHRK=> 7.369 7.342 -0.37% -0.05%
Romanian leu <EURRON=> 4.2 4.212 +0.29% -4.42%
Serbian dinar <EURRSD=> 93.03 93.27 +0.26% -3.82%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +32 basis points to 138bps over bmk*
4-yr T-bond CZ4YT=RR +24 basis points to +165bps over bmk*
8-yr T-bond CZ8YT=RR +18 basis points to +280bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +365bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +293bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +272bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +717bps over bmk*
5-yr T-bond HU5YT=RR +8 basis points to +639bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +540bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1235 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in
brackets: All emerging market news []
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Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by ...)
