* Fx regain strength, zloty firms to 14-month highs
* Poland should consider rate hike, cbank head says
* Czech, Polish, Hungary bond tenders attract strong demand
* Hungarian, Polish bonds extend gains
(Adds bond details)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, March 3 (Reuters) - Central European
currencies rebounded on Wednesday, led by the zloty <EURPLN=> as
Poland's central bank governor Slawomir Skrzypek said the bank
should consider tightening interest rates.
The past few weeks' trend of firming, which had lost steam
early in the day, also got new fuel from strong Polish and Czech
bond tenders, while fresh news about a Greek austerity plan
supported investors' risk appetite.
Hungarian and Polish bonds also extended gains in bullish
sentiment supported by a switch tender where Poland sold almost
5 billion zlotys in bonds []. A Hungarian switch
bond tender also attracted strong demand <HUEXCHANGE>.
The zloty, which eased in morning trade, gained about half
percent against the euro after Skrzypek spoke, to 14-month highs
around 3.9, firmer by 0.3 percent on the day by 1538 GMT.
"The MPC should start considering tightening its monetary
policy, looking at the end of the (inflation) projection's
horizon," the rate setter told reporters. []
Analysts expect Poland's key rate to be increased to 4
percent from current 3.5 percent by the end of the year but are
keeping a wary eye on the inflation outlook, which does not
necessarily point to the need for quick rates hikes.
"If governor Skrzypek is more and more strongly inclined
towards rate hikes, due to inflation growing to 4 percent at the
end of 2012, it's difficult to predict the reaction of investors
on the FX market since short-term forecasts suggest that rate
hikes can wait at least till the end of the year," said BNP
Paribas fx strategist Bartosz Pawlowski.[]
The Czech crown <EURCZK=> and the forint<EURHUF=> gained 0.1
percent and the Romanian leu <EURRON=> was up 0.4 percent.
After interest rate cuts during the global crisis, the
Polish and Czech central banks are expected to shift to rate
hikes later this year, while analysts believe Hungary and
Romania, where rates are higher, still have room to cut.
BOND AUCTIONS STRONG
The region's stock markets, where increased volatility
replaced earlier strong gains this year, were mixed, but
government bond tenders showed continuing solid demand.
Demand for Czech bonds due in 2019 reached double what was
the offer and the average yield dropped. [] The
auction bonds due 2019 <CZ1002471=>, whose yield has dropped to
a one-month low of 4.127/3.999 percent, were down 40 basis
points from a February peak.
Poland sold 4.762 billion zloty ($1.64 billion) worth of
bonds maturing in 2015, 2019 and 2029 in exchange for papers
expiring this year. Skrzypek's comments did not affect prices
and the market was optimistic over Poland's growth prospects.
"Demand was good, prices were good. So we had another
successful tender, underpinning the already positive sentiment,"
said Maciej Slomka, chief fixed income dealer at Pekao Bank.
The Romanian leu had already bucked the trend when other
units eased in the morning and stayed close to a one-month high
after consumption, the largest part of the country's economy,
rose 1.1 percent on the quarter in October-December.
[]
The Czech crown <EURCZK=> firmed after the International
Monetary Fund said on Tuesday the country's exchange rate was in
line with fundamentals. []
Greece's struggle to rein in its budget deficits has raised
market volatility in the region and pushed the euro <EUR=>,
central Europe's reference currency, to a 9-1/2 month low
against the dollar this week. []
But it has also highlighted central Europe's better debt
position. On Wednesday the euro firmed after Greece's cabinet
approved a sweeping new austerity programme. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.717 25.751 +0.13% +2.34%
Polish zloty <EURPLN=> 3.899 3.911 +0.31% +5.26%
Hungarian forint <EURHUF=> 265.85 266.04 +0.07% +1.69%
Croatian kuna <EURHRK=> 7.269 7.261 -0.11% +0.55%
Romanian leu <EURRON=> 4.086 4.104 +0.44% +3.71%
Serbian dinar <EURRSD=> 99.597 99.6 0% -3.73%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +13 basis points to 100bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +122bps over bmk*
10-yr T-bond CZ10YT=RR -7 basis points to +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +402bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +327bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -4 basis points to +525bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +463bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +426bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1638 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet/Sandor
Peto; Editing by Susan Fenton/Toby Chopra/Ruth Pitchford)
