* Forint drops as local corporates sell
* Other CEE forex, stocks down before U.S. data
(Recasts with forint, updates prices)
PRAGUE, Nov 5 (Reuters) - The Hungarian forint lost half a
percent on Friday as local firms sold and fiscal uncertainty
weighed, while other emerging European assets lost gains made in
the wake of the Federal Reserve's asset-buying announcement this
week.
The Polish zloty flirted for a second day with resistance at
3.90 per euro before retreating along with falling stock
markets. Warsaw blue-chip stocks <> edged down from a more
than two-year peak when central bourses turned negative.
Dealers said markets may be pulling back before the release
of U.S. payroll data in the afternoon.
The U.S. Fed's decision this week to buy $600 billion in
U.S. Treasury bonds in a second round of quantitative easing
(QE2) is pushing money flows into emerging markets as investors
chase higher growth and yields. []
Analysts say the zloty and forint stand to benefit the most
among emerging European currencies.
The forint has been weighed down by ratings risks this week
after Standard & Poor's kept the country's outlook on negative
and warned of future budget risks. []
It lost 0.6 percent and was bid at 274.63 per euro as of
1018 GMT.
"Hard currency demand from local corporates in decent size
is lifting the EUR/HUF (exchange rate)," said a Budapest-based
trader. "And the dollar correction did not help either."
Hungary has turned its back on austerity and is gambling on
economic growth to get its finances back in order, but analysts
say its policies could lead to fiscal instability in a couple of
years. []
The zloty <EURPLN=> has led gains recently in emerging
Europe thanks to growing expectations for a rate hike, but it
dropped 0.4 percent on Friday and was bid at 3.924 to the euro.
The Czech crown <EURCZK=> lost 0.3 percent after hitting a
two-year high the previous day.
POLISH RATE HIKE EXPECTATIONS
The zloty -- seen as the biggest gainer among CEE peers this
year in the latest Reuters currency poll -- got a lift this week
after some Polish central bankers who had previously voted for
stable rates called for a hike to cap inflationary pressure.
[] []
But some analysts have said QE2 and a likely delay in
European Central Bank rate tightening could lead to strong zloty
gains that would hurt economic recovery and put pressure on the
central bank to stay on hold for longer.
"The Fed's announcement of additional QE reinforced our
bullish view on emerging markets," Societe Generale said in its
weekly emerging markets report.
"We continue to favour the zloty on the back of an increased
rate hike probability before the end of the year."
The Czech central bank kept rates at record lows on Thursday
as expected but surprised analysts by pushing back its forecast
for the start of a tightening cycle towards the end of next
year. It also cut its 2011 growth forecast to lower than 2010.
[]
Romania's central bank raised its inflation forecasts on
Thursday, signalling that rate cuts that might help the
recession-hit economy grow are unlikely any time soon.
[]
The leu <EURRON=> was flat on Friday, off highs hit earlier
in the week.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.582 24.505 -0.31% +7.06%
Polish zloty <EURPLN=> 3.924 3.908 -0.41% +4.59%
Hungarian forint <EURHUF=> 274.63 272.96 -0.61% -1.56%
Croatian kuna <EURHRK=> 7.347 7.339 -0.11% -0.51%
Romanian leu <EURRON=> 4.289 4.289 0% -1.2%
Serbian dinar <EURRSD=> 107.21 107.23 +0.02% -10.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 84bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +98bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +117bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +373bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +325bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +14 basis points to +567bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +536bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +469bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1120 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Hugh Lawson)
