* Currencies inch lower
* Euro zone industry data trigger brief profit taking
* Financing and banking worries still linger
(adds details, quotes, updates prices)
By Marius Zaharia
BUCHAREST, June 12 (Reuters) - Most central European
currencies edged down on Friday after poor euro zone industrial
data highlighted the emerging region's economic woes, while a
relief rally on hopes that Latvia will avoid devaluation lost
steam.
In the euro zone, the region's main trading partner,
industrial output plunged more than a fifth on the year in April
[], depressing the euro against the dollar and
triggering some profit taking in emerging Europe.
At 1351 GMT, the Polish zloty <EURPLN=> traded 0.4 percent
weaker on the day following a public holiday on Thursday. The
Hungarian forint <EURHUF=> was 0.2 percent lower and the
Romanian leu <EURRON=> was down 0.1 percent, while the Czech
crown was a touch stronger.
"Euro zone industrial output was the main trigger for brief
profit taking in the region," one dealer said.
Regional currencies were boosted for several days this week
by an easing of worries about a possible lat devaluation in
Latvia, but market watchers do not rule out a worsening again of
the Baltic state's economic headaches.
Moreover, some players say Hungary's high level of foreign
debt may mean the ailing economy again becomes the region's
punch bag, after this week's rally due to a favourable interest
rate differential.
Hungary's May inflation data [] came in
surprisingly high on Thursday, boosting expectations that rates
will remain on hold at 9.5 percent. Hungary's rates compare with
3.75 percent in Poland and 1.5 percent in the Czech Republic.
"Although the forint (HUF) could continue to perform
relatively well in the near-term, the macro background does not
favour a lasting HUF appreciation, and Baltic risk has only
temporarily disappeared," Societe Generale wrote in a note while
keeping in place long-crown and zloty trades against the forint.
RANGEBOUND
Concerns about the health of central European banks and
financing hurdles still pointed towards a more fragile outlook
compared with other emerging regions.
RBC Capital Markets recommended on Thursday a long play on
Latin American assets against shorting central European ones.
"Within a 3-9 month timeframe, ... investors should focus on
trades with a long LATAM/short CEE bias," it said.
"CEE ... will remain burdened by not only negative cyclical
but also deep structural issues that will take considerable time
to correct (ie deleveraging following an excessive foreign
borrowing binge, banking-system bailouts, ballooning government
debt, possible changes in FX regimes, etc)."
Currencies have been mostly rangebound for more than two
months, with the crown moving between 26.50 and 27 per euro
since the end of April, the zloty trading between 4.3 and 4.6
and the forint between 275 and 290.
The leu stabilised within a range of 4.1-4.3 per euro after
Romania secured international aid in March.
In debt markets, Hungarian bond yields dropped 5-10 basis
points following the overnight forint strengthening, while
Polish bonds were steady in a quiet trade after Thursday's
market holiday.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.661 26.694 +0.12% +0.35%
Polish zloty <EURPLN=> 4.474 4.455 -0.42% -8.02%
Hungarian forint <EURHUF=> 277.58 276.97 -0.22% -5.05%
Croatian kuna <EURHRK=> 7.255 7.263 +0.11% +1.52%
Romanian leu <EURRON=> 4.198 4.194 -0.1% -4.37%
Serbian dinar <EURRSD=> 93.39 93.799 +0.44% -4.19%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +31 basis points to 127bps over bmk*
4-yr T-bond CZ4YT=RR +7 basis points to +143bps over bmk*
8-yr T-bond CZ8YT=RR +14 basis points to +254bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +371bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +301bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +266bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +26 basis points to +790bps over bmk*
5-yr T-bond HU5YT=RR +20 basis points to +736bps over bmk*
10-yr T-bond HU10YT=RR +20 basis points to +656bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1651 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
Editing by David Stamp)
