* Forint leads losses, zloty falls about 1 pct on euro zone
worry
* Hungary post-election rally fizzles after cbank attack
(Recasts forint drop, updates quotes)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, April 27 (Reuters) - Hungary's forint was set
for its biggest daily drop this year on Tuesday, falling 1.6
percent to lead emerging Europe down as a post-election rally
fizzled and concerns rose over Greece's aid package.
Germany's junior coalition party said Berlin was not certain
to put its weight behind a financial rescue for debt-laden
Greece, raising worry that Athens might not secure aid in time
to meet a debt deadline on May 19. []
The prospect also stoked fears that other euro zone states
might face similar problems, hitting appetite for riskier assets
that weighed on emerging European Union countries despite their
better debt position.
There was an abrupt reversal of a Hungarian market rally
that had followed a decisive election victory for the
centre-right Fidesz, which won the two-thirds majority needed to
push through vital reforms in Sunday's run-off vote.
[]
Central bank Governor Andras Simor said on Monday
intervention on the forint could not be ruled out, adding
pressure on the forint.
Investor nerves were also tested by comments from Fidesz
officials calling on Simor to resign; the party has stepped up
criticism of Simor's past investments in a Cyprus-based firm and
over what it said were serious policy mistakes. []
"We all knew what Fidesz would do once they take power," a
Budapest dealer said, adding that the attacks on Simor had a
minor market effect compared to Greece.
The forint <EURHUF=> fell to bid at 267.54 to the euro by
1358 GMT, hitting a more than two-week low after the execution
of stop losses. The Budapest bourse <> dropped around 1
percent with indices in the region.
Hungarian bonds were more subdued; yields rose 8 basis
points, a fraction of the drop to multi-year lows this month.
Hungarian assets rallied following a decisive victory in the
first round of elections on April 11 that first gave Fidesz a
strong mandate for deep economic reforms in the country of 10
million that has relied on IMF aid.
But tension between the new ruling party and the central
bank, and a 25 basis point rate cut on Monday that was followed
by comments from Simor not ruling out interventions on the FX
market have made the bounce short-lived. []
(For more stories on the Hungarian election, double-click
[])
GREECE STORY
The forint drop hit peers in the region, with the Polish
zloty <EURPLN=> losing 0.9 percent to the weak side of 3.90 per
euro. The Czech crown <EURCZK=> and Romania's leu <EURRON=> fell
0.2-0.3 percent against the common currency.
Analysts say persistent uncertainty over Greece could affect
emerging Europe, especially if the euro drops more.
"If the EUR/USD breaches 1.3268, nothing in the world will
stop it from going all the way to 1.30... No way we won't feel
that," another Budapest dealer said. "We're not insulated from
the euro zone like some people like to believe. We are emerging
markets... but this is Europe."
So far, however, the region's better growth outlook and
lower debt levels compared to euro zone periphery states have
continued to attract investors fleeing the euro, and pushed
currencies, bonds and stocks to multi-month highs this year.
Greek 5-year credit default swaps (CDS) hit a record high
earlier on Tuesday, touching 798 basis points, while the Czech
5-year CDS stood at 77 bps, and Poland's at 105 basis points.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.491 25.431 -0.24% +3.24%
Polish zloty <EURPLN=> 3.916 3.879 -0.94% +4.8%
Hungarian forint <EURHUF=> 267.54 263.18 -1.63% +1.05%
Croatian kuna <EURHRK=> 7.249 7.255 +0.08% +0.83%
Romanian leu <EURRON=> 4.126 4.115 -0.27% +2.7%
Serbian dinar <EURRSD=> 99.14 99.057 -0.08% -3.29%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +8 basis points to 63bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +71bps over bmk*
10-yr T-bond CZ10YT=RR +7 basis points to +70bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +11 basis points to +364bps over bmk*
5-yr T-bond PL5YT=RR +11 basis points to +309bps over bmk*
10-yr T-bond PL10YT=RR +10 basis points to +257bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +439bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +381bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +348bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1604 CET.
Currency percent change calculated from the daily domestic
close at 1600 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 Dagmara
Leszkowicz, editing by Stephen Nisbet)
