PRAGUE, Oct 31 (Reuters) - The Czech crown rose on Friday,
bucking an edge downwards in other emerging European currencies,
but the region generally appeared to pause and take a breath
after weeks of crisis-inspired roller-coaster trading.
The crown was 1.2 percent higher to the euro from Thursday's
local close, bid at 24.15. Dealers said it was difficult to find
a fundamental reason for the rise but the currency may have
temporarily parted ways with others in the region.
The zloty <EURPLN=> slipped 0.75 percent against the euro
3.633. The Romanian leu was also lower by 0.66 percent to 3.662.
Hungary's forint <EURHUF=>, feeling some respite from the
heavy losses it suffered before Budapest closed a $25 billion
IMF/EU bailout deal this week, was virtually flat.
Dealers said there was disappointment from a Japanese rate
cut decision that didn't meet expectations, a move that pushed
the euro weaker against the dollar. They said the entire region
could potentially follow Asian equities markets lower.
"The zloty is weaker again, compared with yesterday's close,
because of the worsening sentiment towards emerging economies
after the slightly smaller-than-expected rate but by the Bank of
Japan," Bank Zachodni wrote in a note to clients.
In Romania, dealers said there was no reaction from the
previous day's central bank decision, although investor caution
was evident and they expected a continued unravelling of
positions from foreign investors to less risky markets.
"There is renewed risk aversion that applies to the whole
region," said a dealer with a foreign bank in Bucharest.
Romania's central bank held its benchmark interest rate at
10.25 percent on Thursday as inflationary pressures remained
high and policymakers waited for more impact of the global
financial crisis on local markets.
On the crown, dealers said it was difficult to see an
impetus, but that the low-interest-rate currency could
potentially be taking back a role as a funding unit. Low
liquidity has also made moves more extreme in recent days.
"The crown sometimes has a life of its own. Sometimes it
acts like an emerging markets currency, and sometimes a funding
currency. We're trying to stick to technical levels," said a
trader from a foreign-owned bank in Prague.
EURO SCEPTICISM
Analysts also said sceptical comments on euro adoption by
Polish and Czech officials may undermine the region.
On Thursday, Poland's president returned to his trademark
eurosceptic rhetoric on the euro, signalling a domestic
political compromise on the single currency may be hard to
reach. The head of the Czech central bank also rejected fast
euro adoption as a shield against market turmoil []
Investment bank UBS also recommended going long euro against
the crown due to what it said was too much appreciation in light
of the global slowdown [].
Hungarian bonds were steady on Friday morning in a very slow
market, traders said, with yields at Thursday's closing levels.
Earlier on Friday, Hungarian Prime Minister Ferenc
Gyurcsany told daily Nepszava in an interview that the central
bank may be able to lower interest rates soon as pressure on
domestic markets eases. Hungary's central bank hiked interest
rates by 3 percentage points to 11.5 percent in an emergency
move last week to contain a fall in the forint.
"The are no transactions yet, so the market is very wide and
it is difficult to say what prices are out there," said Pawel
Kielek from ABN Amro in Warsaw. "At first glance, my feeling is
the market is a touch weaker."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.147 24.45 +1.24% +8.87%
Polish zloty <EURPLN=> 3.633 3.606 -0.75% -0.9%
Hungarian forint <EURHUF=> 261.49 261.72 +0.09% -3.42%
Croatian kuna <EURHRK=> 7.161 7.164 +0.04% +2.26%
Romanian leu <EURRON=> 3.662 3.638 -0.66% -2.28%
Serbian dinar <EURRSD=> 84.477 84.857 +0.45% -7.26%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +32 basis points to +210bps over bmk*
5-yr T-bond CZ5YT=RR -5 basis points to +174bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +120bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -19 basis points to +454bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +381bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -12 basis points to +987bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +918bps over bmk*
10-yr T-bond HU10YT=RR -68 basis points to +615bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1040 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus; Writing by Michael Winfrey;
Editing by Andy Bruce)
