* Rate outlook supports euro, CEE currencies; stocks rebound
* Czech PMI hits record, others stay strong
* Czech, Romania rates seen unchanged; Czech hawks watched
(Adds bond prices, more on rates)
PRAGUE, Feb 1 (Reuters) - Central European markets gained on
Tuesday along with the rising euro as expectations of higher
interest rates in the region lifted currencies, helped by strong
manufacturing sector surveys.
The Czech purchasing managers' index (PMI) hit a record high
in January, while Poland's PMI dipped a touch after recording
its third highest monthly mark in December. []
[] Hungary's PMI, calculated under different
methodology, also rose.
Stronger growth, trade and resulting rises in interest rates
are expected to boost currencies across the region's emerging
markets. []
The Hungarian forint <EURHUF=> rose half a percent to bid at
271.4 to the euro by 0947 GMT. The Polish zloty <EURPLN=> added
0.5 percent and the Czech crown gained 0.2 percent, while
Romania's leu <EURRON=> inched up 0.1 percent.
Currencies in the region also tend to track the euro, which
was near a two-month high against the dollar after a jump in
euro zone inflation fuelled expectations of rate hikes there.
In Hungary, the rally has come in anticipation of reform
plans to be unveiled by the government this month, but analysts
said the rise may be beginning to look overdone.
Political pressure was also building with the newspaper
Vilaggazdasag reporting that EU Economic and Monetary Affairs
Commissioner Olli Rehn has written a letter to the government
seeking urgent details of fiscal reforms. []
"Although being bullish on Hungary is rapidly becoming a
fashionable trade idea, we still see non-resident real money
positioning as very light and also agree that the credit market
has seriously lagged the squeeze in (bonds)," UniCredit said.
STOCKS REBOUND, RATES WATCHED
Stock markets rebounded around half a percent on Tuesday
after Monday's falls as risk aversion linked to Egypt's ongoing
political crisis eased, though dealers said it continued to hang
over the market.
All of central Europe's economies are still classed firmly
as riskier emerging markets -- meaning any global retreat in
risk appetite tends to weaken assets.
"The zloty is underpinned by rising stocks and a stronger
euro. However, there are more dead during demonstrations in
Egypt, the situation can quickly reverse," a Warsaw dealer said.
Investors were also preparing for rate decisions in the
Czech Republic and Romania on Thursday, with both central banks
expected to keep borrowing costs unchanged at record lows.
While Romania is expected to retain its loose policy, the
Czechs are seen following the Hungarians and Poles in raising
interest rates this year.
The Hungarian government has criticised rate increases,
which bank Governor Andras Simor said has become
counterproductive and that the bank has come under "blatant
pressure". []
On Thursday, Czech policymakers will debate a new quarterly
forecast expected to show a higher growth outlook than
previously, possibly meaning rate hikes will come sooner than
expected.
"New macroeconomic forecasts will make the discussion
intense, (but) we expect the rates to stay on hold," Komercni
Banka traders said in a daily note.
A more hawkish tone has supported the currency and lifted
Czech forward rates in recent weeks. Some analysts expect the
main Czech rate to rise half a percentage point to 1.25 percent
in a year, less than the three rate hikes priced in by markets.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.133 24.189 +0.23% +3.59%
Polish zloty <EURPLN=> 3.91 3.928 +0.46% +1.23%
Hungarian forint <EURHUF=> 271.4 272.9 +0.55% +2.42%
Croatian kuna <EURHRK=> 7.409 7.413 +0.05% -0.39%
Romanian leu <EURRON=> 4.256 4.259 +0.07% -0.54%
Serbian dinar <EURRSD=> 104.42 104.4 -0.02% +1.44%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 36bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +64bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +83bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +346bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +504bps over bmk*
5-yr T-bond HU5YT=RR -7 basis points to +461bps over bmk*
10-yr T-bond HU10YT=RR -8 basis points to +406bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1047 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 Patrick Graham, John Stonestreet)
