(adds details, fixed income)
By Marius Zaharia
BUCHAREST, Nov 26 (Reuters) - The Polish zloty gained ground
against the euro before a rate decision on Wednesday, while its
regional peers held virtually steady, as players remained
sceptical the latest U.S. measures could ease recession worries.
At 0945 GMT, the zloty <EURPLN=> was 0.89 percent firmer
against the euro at 3.776.
The Czech crown <EURCZK=> was up 0.09 percent, the Romanian
leu <EURRON=> and the Hungarian forint <EURHUF=> were down 0.13
percent each at 3.808 and 260.51 respectively.
"Euro/zloty tested an important support level (on Tuesday)
at 3.79 and it was not broken. The fall below 3.79 may open way
to more significant gains for the zloty," Pekao said in a note.
Analysts see Polish rates remaining flat at 6 percent, but
some of them do not rule out a surprise cut as concerns over an
economic slowdown deepen [].
"Today the rate call will be the eye catcher (and) it could,
in the end, be supportive for the zloty," KBC said in a morning
note. "Rates should stay on hold, but the council is likely to
shift to an outright dovish stance."
Retail sales data out Wednesday <ECONPL> supported doves in
the Polish central bank, with sales growth coming in below
expectations at 7.9 percent [].
In other trade, the Croatian kuna <EURHRK=> was up 0.3
percent, while the Serbian dinar <EURRSD=> was down 0.4 percent
as successive central bank interventions this week failed to
give longer-term support for the battered currency.
HANGOVER
Most emerging European currencies entered a firming path
this weak, lifted by stock gains after news of the Citigroup
rescue package and new U.S. plans to stimulate the economy.
But worries came in the focus again early on Wednesday, as
investors doubt that successive U.S. steps aimed at restoring
confidence in financial markets, including the latest $800
billion plan to boost consumer lending, would be sufficient.
"We have to remain sceptical," Commerzbank said in a
research note. "It seems that pay time for the U.S. economy is
unavoidable ... for global investors this means risk appetite
will probably not come back big style."
"For today (Wednesday), a hangover from yesterday's euphoria
is likely."
As recession fears are mounting, other central banks in the
region think about easing their monetary policy.
The Hungarian central bank, which will detail its November
inflation report at about 1430 GMT, said on Tuesday it sees more
room for rate cuts as well, after a surprise 50 basis point
reduction on Monday to 11 percent [].
Growth concerns surfaced also in Romania, after ratings
agency Moody's predicted a recession for the demand-driven
economy next year and many analysts expect the central bank to
start cutting rates in the first quarter.
In fixed income markets, Hungarian bonds were steady and
Polish bond prices fell as investors moved to take profit from a
recent rally sparked by expectations for rate cuts from some of
the market players.
"There is a lot of action on the bond market," said PKO BP
fixed-income dealer Marek Kaczor. "We had some profit taking
before the interest rates decision - it's key today."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.15 25.173 +0.09% +5.08%
Polish zloty <EURPLN=> 3.776 3.81 +0.89% -4.87%
Hungarian forint <EURHUF=> 260.51 260.16 -0.13% -3.03%
Croatian kuna <EURHRK=> 7.131 7.15 +0.27% +2.67%
Romanian leu <EURRON=> 3.808 3.803 -0.13% -6.36%
Serbian dinar <EURRSD=> 88.98 88.647 -0.38% -12.98%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -11 basis points to 152bps over bmk*
5-yr T-bond CZ5YT=RR +5 basis points to +154bps over bmk*
10-yr T-bond CZ9YT=RR +26 basis points to +128bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +400bps over bmk*
5-yr T-bond PL5YT=RR +15 basis points to +339bps over bmk*
10-yr T-bond PL10YT=RR +8 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +996bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +928bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +582bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1144 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Toby Chopra)
