* Czech, Polish PMI dips, Hungary jumps
* Euro, stocks lend support to FX
* Short covering in Hungary bonds
(Adds Hungarian bonds, Czech PMI, quote)
By Jason Hovet
PRAGUE, Aug 2 (Reuters) - A firmer euro and rising stocks
boosted central European currencies on Monday, with the Polish
zloty breaking a key level and the Hungarian forint also gaining
on an improved manufacturing outlook.
The latest manufacturing surveys gave a hint of a slowing
economic recovery and lower exports for a region that is highly
dependent on trade to the euro zone.
Poland's purchasing manufacturing index (PMI) inched down
but held above the 50 mark dividing expansion from contraction.
Czech PMI dipped from an almost three-year peak, signalling the
slowdown analysts expect in the second half of the year but
still showing strong expansion. [] []
Hungarian PMI, calculated differently than peers, jumped
into growth territory at 53.5, giving a small boost to the
forint. []
The zloty <EURPLN=> rose 0.5 percent to bid at a 2-1/2 month
high near 3.984 to the euro by 0944 GMT, breaking the 4.0 level
at which it has failed to hold on to gains in the past month.
The forint <EURHUF=> gained 0.6 percent. The Czech crown
<EURCZK=>, the region's top mover this year, rose 0.3 percent.
Central European currencies often track moves in the
euro/dollar, which was nearing a three-month high. Stock markets
in central Europe also lent support by rising up to 2 percent,
led by Budapest <>.
"International optimism is going strong still, with the
dollar and the yen weaker (against the euro), and the mood on
local markets is calming further," a Budapest dealer said.
"Although strengthening (in the forint) is the likelier way
forward, a correction is on the cards all the time."
SHORTS
Markets have recovered after a jolt from the suspension of
IMF/EU talks in Hungary last month, with the forint closing last
week with gains and the finance ministry selling more than
planned in the first sale of bonds since talks broke down.
That has led to short-covering on secondary markets and
government bond yields fell by 7-13 basis points on Monday.
"There are shorts out in the market and those who had
expected a rise in yields have to buy back bonds now," a fixed
income dealer said. "Now that the yield curve is almost flat, it
may be worth buying shorter bonds."
The spread between 3- and 10-year yields is at 30 basis
points, down from over 100 bps two months ago.
Markets are eyeing Romanian and Czech central bank rate
decisions this week that are expected to keep rates on hold.
Analysts expected some retreat in the crown leading up to
Thursday's meeting, after it firmed below the 25 per euro level
to a 20-month high last week. That level has sparked verbal
interventions from the central bank in the past.
The unit is 0.4 percent off its peak hit last week when
improved economic data and the first approved austerity measures
propelled it past resistance levels. On Monday, it was nearing a
support level of 24.70 on improved risk appetite.
"After breaking support at 24.800 last week the next target
down for EUR/CZK is 24.700 but that is seen stronger as market
contacts report good bids at around this level," 4Cast wrote.
In Romania, the leu <EURRON=> edged up 0.1 percent, but
dealers said gains would likely be limited by the chances of
central bank intervention to prevent volatility.
Trade may also remain subdued before the end of an
International Monetary Fund review on Wednesday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.687 24.751 +0.26% +6.61%
Polish zloty <EURPLN=> 3.984 4.003 +0.48% +3.01%
Hungarian forint <EURHUF=> 281.88 283.42 +0.55% -4.09%
Croatian kuna <EURHRK=> 7.224 7.233 +0.12% +1.18%
Romanian leu <EURRON=> 4.244 4.248 +0.09% -0.16%
Serbian dinar <EURRSD=> 106.5 106.29 -0.2% -9.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +99bps over bmk*
10-yr T-bond CZ9YT=RR -4 basis points to +103bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +387bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +369bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -18 basis points to +579bps over bmk*
5-yr T-bond HU5YT=RR -10 basis points to +541bps over bmk*
10-yr T-bond HU10YT=RR -12 basis points to +449bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1145 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet;
Editing by Andrew Heavens)
