* Czech c/a, output data boost crown
* Investors more hopeful on Latvia, but volatility exists
* Analysts say Polish IPO could help zloty
(Recasts with new prices, adds bonds)
By Jason Hovet
PRAGUE, Oct 12 (Reuters) - Central European currencies
bounced back on Monday, with the Czech crown leading gains after
a lower current account gap, and investors turned more hopeful
Latvia would cut its budget to secure international aid.
Czech industry output rose on a monthly basis in August and
the current account gap was smaller than expected, data showed,
helping temper some expectations the central bank would further
cut interest rates from their all-time low. []
Inflation in Romania also slowed in September, and left room
open for interest rate cuts to aid the hard-hit economy.
But the leu <EURRON=> was dragged 0.1 percent lower by
political uncertainty before Tuesday's no-confidence vote
against the minority government that lost a coalition partner
two weeks ago. [] []
Central European currencies were also boosted by gains in
equity markets, which extended rises in the morning as Budapest
<> and Prague <> both added around 2 percent.
Hungary's forint <EURHUF=> added 0.5 percent to 269.7 per
euro. The Czech crown <EURCZK=> gained 0.5 percent to 25.78,
coming back from a two-month low earlier.
"One positive was the Czech current account data," said
Gyula Toth, emerging strategist at UniCredit in Vienna. "Also
expectations are doing the rounds that the Latvian government...
will agree about the missing 175 million lats expenditure cuts
next year."
LATVIA ADDS TO WORRIES
Investors have kept a nervous eye on Baltic neighbour
Latvia. Prime Minister Valdis Dombrovskis said last week his
country planned more budget measures to win approval from
international lenders after being criticised for wavering on its
promise to make big budget savings. []
Analysts said the still uncertain situation there would keep
central European currency markets volatile, although reaction
has been less muted than in June, when the investors were
unnerved over the possibility of a lat devaluation.
Analysts say the region appears largely insulated from
Latvia's woes. []
In Poland, the zloty <EURPLN=> rose to 4.257 to the euro by
1003 GMT. Some analysts said flows before the initial public
offering of Polish utility PGE could add support. []
Polish bond yields were also steady, and markets looked
ahead to the launch of new bonds for road infrastructure this
week. Dealers said the market was balanced by little new supply
the rest of the year along with expectations of heavier
borrowing next year.
"All this prevents temptations of a bigger sell-off," a
dealer said, adding demand will be there for the new
infrastructure bonds issued by state bank BGK.
Slipping risk aversion, rising budget gaps and political
uncertainty and, in the crown's case, talk of more monetary
easing have combined with Latvian worries to put currencies on a
weaker footing over the last week.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.782 25.922 +0.54% +3.77%
Polish zloty <EURPLN=> 4.257 4.279 +0.52% -3.34%
Hungarian forint <EURHUF=> 269.72 271.17 +0.54% -2.29%
Croatian kuna <EURHRK=> 7.251 7.253 +0.03% +1.57%
Romanian leu <EURRON=> 4.282 4.276 -0.14% -6.25%
Serbian dinar <EURRSD=> 92.911 92.89 -0.02% -3.69%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -26 basis points to 123bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +159bps over bmk*
10-yr T-bond CZ10YT=RR -21 basis points to +131bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +335bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +302bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +522bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +492bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +449bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1203 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 Andy Bruce)
