* FX at 1-wk lows, stocks plunge on renewed euro weakness
* Romania CDS spreads widen by 14 bps to 255
* Leu pressured as thousands protest against pay cuts
* Dealers suspect another c.bank intervention to protect leu
(Adds stocks, Hungarian bond yields, fresh quotes)
By Marius Zaharia
BUCHAREST, May 19 (Reuters) - Central European assets
plunged on Wednesday, tracking a broader selloff caused by
German regulatory clampdown, while Romanian markets were
pressured as mass protests test the government's ability to
enforce key pay cuts.
The region's currency, stocks and bonds have been affected
by euro weakness against the dollar over concerns that austerity
measures could hit growth in the euro zone and implicitly
emerging Europe, whose exports go mainly to the indebted bloc.
The euro suffered another blow on Wednesday, falling to its
lowest in over four years after Germany announced a ban that
covered short-selling of some securities, leaving FX markets the
only place where investors feel free to bet against European
assets. []
At 0918 GMT, the Czech crown <EURCZK=> was down 0.8 percent,
the Hungarian forint <EURHUF=> traded 1.1 percent lower, while
the Polish zloty <EURPLN=> led losses with a 1.5 percent plunge.
The Romanian leu <EURRON=> lagged with a 0.1 percent fall,
with dealers suspecting another round of central bank covert
interventions. All currencies have hit one-week lows during the
session.
"There is no way we can resist the pressure that comes from
the euro right now," one dealer in Budapest said."We can go
north of (EUR/HUF) 282, and the next real stop is 285. beyond
that, it's a whole other ball game."
Dealers in Warsaw said the zloty could test 4.2 per euro in
coming sessions as euro selling pressure mounts.
Stocks fell over 2 percent across the region, with Warsaw's
bourse <> leading losses, having fallen 3.5 percent.
Hungarian bonds fell, with short-term yields rising 15 basis
points.
SOCIAL UNREST
In Romania, tens of thousands of people gathered in front of
the government's headquarters in central Bucharest on Wednesday,
to protest against drastic pay cuts, key to keep a deal with the
International Monetary Fund on track. []
The 20 billion euro IMF-led deal is crucial to maintain the
government's ability to finance its ballooning budget deficit,
an issue which was highlighted by two failed debt auctions
earlier this month as investors feared the government may bow to
mounting social pressure.
BNP Paribas said social unrest would reflect mainly in
rising costs to insure sovereign debt against default. CDS
spreads for Romania widened 14 basis points to 615.
The leu has also come under pressure, but market fears of
possible central bank intervention have contained larger losses.
"Over the past sessions, as well as many months,
depreciation pressures were usually met with resistance from the
central bank," ING Bank said in a note.
"It could be that the central bank may allow a more
pronounced weakening today, probably after the 1000 GMT exchange
rate fixing, given the large protest rally."
The central bank's policy is not to comment when dealers
suspect interventions, but it has repeatedly said it does not
favour volatility.
A ten-year Romanian bond tender is expected to fail on
Thursday <BNR032>.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.676 25.475 -0.78% +2.5%
Polish zloty <EURPLN=> 4.083 4.023 -1.47% +0.51%
Hungarian forint <EURHUF=> 280.96 277.92 -1.08% -3.78%
Croatian kuna <EURHRK=> 7.262 7.253 -0.12% +0.65%
Romanian leu <EURRON=> 4.199 4.193 -0.14% +0.91%
Serbian dinar <EURRSD=> 101.48 101.476 0% -5.52%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 114bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +113bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +103bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +14 basis points to +561bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +498bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +428bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1218 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 Toby Chopra)
