* Polish govt seen defending zloty as currency options weigh
* FX, stocks lower on risk aversion
* Polish, Czech cbankers hint at rate cuts to come
(Adds details, updates market)
WARSAW/BUDAPEST, May 28 (Reuters) - Weakening of Eastern
European currencies halted on Thursday as traders said the
Polish government entered the market directly to defend the
zloty at the 4.50 level against the euro.
The zloty had hit a two-week low on Thursday morning amid
concerns over the expiration of currency options and a drop in
global risk appetite. The finance ministry was seen converting
euros as the zloty hit the key support level. []
The Hungarian forint and Czech crown had followed the zloty
lower, while stocks dropped everywhere as investors worried over
the state of the global economy and expanding debt in the United
States.
The zloty <EURPLN=> was 1.5 percent below Wednesday's
domestic close at 4.503 euro by 1411 GMT. Hungary's forint
<EURHUF=> was 0.9 percent lower, while the Czech crown and
Romania's leu bid 0.3 percent lower.
Dealers said the zloty was hit by an end of month sell-off
caused by the expiry of currency options, while nerves were
fraught ahead of a first quarter GDP release on Friday, after
peers all showed steep contractions in that period.
RATE MOVES, ECONOMY EYED
The Polish and the Czech central banks both hinted at rate
cuts to come as the economic outlook unnerves markets. The
Polish monetary policy council's Marian Noga said the bank may
trim rates in June. []
In Prague, Central Bank Vice-Governor Miroslav Singer became
the third of seven monetary policy makers to say another rate
cut was a possibility. []
The hints come even as currencies have yet to fully recover
from steep losses suffered since hitting highs last summer. The
zloty has fallen by almost a since then, straining Polish
companies that had bet on more appreciation through currency
options.
The Polish financial authority said in April companies were
exposed to around 4.5 billion zlotys ($1.41 billion) in soured
options, half of earlier estimates. []
"It seems the options story traditionally comes back at the
end of the month and though the problem diminishes, it still
exists," said Henryk Sulek, dealer at Millennium Bank in Warsaw.
In Hungary, unemployment continued its rise and reached a
13-year high at 9.9 percent. Analysts have warned the jobless
figure would hit double digits by June.
Stocks in the region also trended lower with 1 percent falls
in Budapest, Warsaw and Prague alike as the U.S market opened
lower.
The bond market was little changed from Wednesday in Hungary
and Poland, while Czech yields edged higher.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.82 26.732 -0.33% -0.25%
Polish zloty <EURPLN=> 4.503 4.436 -1.49% -8.62%
Hungarian forint <EURHUF=> 285.08 282.65 -0.85% -7.55%
Croatian kuna <EURHRK=> 7.302 7.32 +0.25% +0.86%
Romanian leu <EURRON=> 4.194 4.18 -0.33% -4.28%
Serbian dinar <EURRSD=> 94.575 94.527 -0.05% -5.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to +136bps over bmk*
4-yr T-bond CZ4YT=RR -6 basis points to +153bps over bmk*
8-yr T-bond CZ8YT=RR +15 basis points to +266bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +403bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +314bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +269bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -24 basis points to +836bps over bmk*
5-yr T-bond HU5YT=RR -61 basis points to +750bps over bmk*
10-yr T-bond HU10YT=RR -51 basis points to +635bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1611 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus, Writing by Marton Dunai in
Budapest, Dagmara Leszkowicz in Warsaw and Jason Hovet in
Prague; editing by Toby Chopra)
