* Zloty hits new 1-mth high as state-owned bank sells euros
* EUR/PLN pushed lower ahead of final fixing for debt level
* Crown up 0.1 pct, breaks through 200-day moving average
By Dagmara Leszkowicz and Marcin Goettig
WARSAW, Dec 31 (Reuters) - The Polish zloty hit one-month
highs on Friday on buying by a state bank designed to keep
government debt levels within legal limits, while other
currencies in the region tracked the euro higher.
Market participants had expected the Polish finance ministry
to try to support the zloty through state-owned bank BGK ahead
of a Dec. 31 fixing that determines the level of this year's
public debt. A quarter of the country's debt is denominated in
foreign currencies.
Under Polish law, if debt breaches 55 percent of gross
domestic product (GDP), the government is required to make
painful spending cuts, something it especially wants to avoid
before parliamentary elections due next autumn.
"BGK is hitting bids hard to push the final fixing lower,"
one Warsaw-based dealer said. Two other FX dealers in Warsaw
confirmed the presence of BGK on the market.
The bank and the finance ministry declined to comment.
At 1137 GMT the zloty <EURPLN=> was trading up 0.2 percent
versus the euro, a touch off highs of 3.948, with the highest
hourly turnover in a month, just ahead of the final fixing that
took place at 1000 GMT.
The currency was fixed at 3.9603, a figure widely expected
to be low enough to keep the debt level below the 55 percent
threshold.
The zloty had shrugged off Thursday's news of planned
changes in the Polish pension system as the move was less
radical than in Hungary and will lead to lower debt and deficits
next year.
Polish Prime Minister Donald Tusk unveiled plans to cut
employees' contributions to mandatory private pension funds to
2.3 percent of their monthly salaries from 7.3 percent to help
shore up budget finances. []
Yields on Polish 10-year bonds jumped 5 basis points on
Thursday on the news but there was no significant activity on
the market on Friday.
In 2010 the zloty has gained 3.8 percent against the euro,
while the Czech crown <EURCZK=> has risen around 5 percent.
CZECH CROWN FIRMS
The crown hit its highest level since Dec 10 on Friday in
very low liquidity after bouncing off a key resistance level
earlier in the week.
"It's all a matter of two factors, very poor liquidity and,
of course, the euro/dollar is at highs now," said Lubos Kolarik,
a dealer at Komercni Banka.
The currency gained 0.1 percent on Friday, breaking through
its 200-day moving average -- a positive technical signal.
Hungary's forint also firmed in thin turnover but it
continued to underperform the region. It has lost 3 percent
versus the euro in 2010.
The firmer euro also helped the forint rebound against the
Swiss franc <CHFHUF=> though it remains near the record lows to
the Swissie hit in September, fuelling fears that more Hungarian
households may default on franc debt next year.
Yields on Hungarian government paper dropped by some 2-3
basis points on Friday.
Liquidity on the country's foreign exchange and fixed income
markets is likely to remain low in the first two weeks of 2011
and dealers said news from the euro zone debt crisis would set
the trend for Hungarian assets early next year.
"International trends, and within that the euro debt crisis
and the (movement of the) euro itself, will determine what
happens here," one Budapest-based currency dealer said.
"The government is due to outline its reform plans in
February... Until then the (domestic) market could be in a
wait-and-see stance."
The Romanian leu <EURRON=> gained 0.1 percent in thin trade,
also helped by the stronger euro.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.095 25.111 +0.06% +4.87%
Polish zloty <EURPLN=> 3.957 3.965 +0.2% +3.71%
Hungarian forint <EURHUF=> 278.03 279.08 +0.38% -2.76%
Croatian kuna <EURHRK=> 7.38 7.383 +0.04% -0.96%
Romanian leu <EURRON=> 4.283 4.286 +0.07% -1.06%
Serbian dinar <EURRSD=> 105.15 105.62 +0.45% -8.82%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -5 basis points to 98bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +90bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +108bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +668bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +602bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +500bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1237 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marcin Goettig;
Editing by John Stonestreet)
