* Forint drops as local corporates sell, fiscal risks weigh
* Better-than-expected U.S. databoost risk sentiment
* Polish zloty, Romanian leu both flat
(Recasts, updates prices)
By Jason Hovet and Krisztina Than
PRAGUE/BUDAPEST, Nov 5 (Reuters) - Better-than-expected U.S.
jobs data helped the region's currencies recoup some of their
losses by late Friday, but Hungary's forint recovered only
slightly with fiscal uncertainties still weighing on the unit.
The forint <EURHUF=> led the day's losses by dropping half a
percent, while the Polish zloty <EURPLN=> flirted for a second
day with resistance at 3.90 per euro.
A dealer in Budapest said that hard currency demand from
local corporates in decent sizes had also contributed to the
forint's losses but these flows dried up by the afternoon.
"The flow dried up and better-than-expected U.S. data helped
the forint firm past 274 to the euro again," he said.
"The upbeat U.S. data boosted risk sentiment."
Government bond yields also edged lower in late trade.
Non-farm payrolls in the U.S. rose 151,000 in October, the
first increase since May, beating expectations, which economists
said was a sign of moderate recovery in the economy.
The U.S. Fed's decision this week to buy $600 billion in
U.S. Treasury bonds in a second round of quantitative easing
(QE2) is pushing money flows into emerging markets as investors
chase higher growth and yields. []
But the forint has been weighed down by concerns over longer
term fiscal sustainability, after earlier this week Standard &
Poor's kept Hungary's outlook on negative and warned of future
budget risks despite meeting 2010 and 2011 deficit targets.
[] []
Economy Minister Gyorgy Matolcsy said on Friday that
Hungary's fiscal position would continue to improve beyond 2012
as growth would accelerate and expenditures decrease.
[]
ZLOTY IN FAVOUR
The Polish zloty -- seen as the biggest gainer among CEE
peers this year in the latest Reuters currency poll -- got a
lift this week after some Polish central bankers who had
previously voted for stable rates called for a hike to cap
inflationary pressure. [] []
Some analysts have said QE2 and a likely delay in European
Central Bank rate tightening could lead to strong zloty gains
that would hurt economic recovery and put pressure on the
central bank to stay on hold for longer.
"The Fed's announcement of additional QE reinforced our
bullish view on emerging markets," Societe Generale said in its
weekly emerging markets report.
"We continue to favour the zloty on the back of an increased
rate hike probability before the end of the year."
Deutsche Bank has recommended to buy the zloty <EURPLN=>
with the target at 3.7750 against the euro as the currency is
supported by expected rate hikes and privatisation inflows.
The central bank's Monetary Policy Council (MPC) has kept
rates flat for 16 months, with the key rate at a record low of
3.5 percent, but it is widely expected to raise borrowing costs
soon, although the market is split over the timing of a hike.
"From a FX perspective therefore central bank policy offers
favourable risk-rewards, with ongoing state privatisations
adding to the potential for some near-term appreciation in
the PLN," Deutsche wrote in a note released on November 4.
At 1415 GMT the zloty <EURPLN=> and the leu <EURRON=> were
flat, while the Czech crown <EURCZK=> lost 0.3 percent after
hitting a two-year high the previous day.
The Czech central bank kept rates at record lows on Thursday
as expected but surprised analysts by pushing back its forecast
for the start of a tightening cycle towards the end of next
year. It also cut its 2011 growth forecast to lower than 2010.
[]
Romania's central bank raised its inflation forecasts on
Thursday, signalling that rate cuts that might help the
recession-hit economy grow are unlikely any time soon.
[]
Romania's leu <EURRON=> was flat against the euro held by a
central bank decision to keep interest rates at a record low of
6.25 percent earlier this week, dealers said.
"We could see some upward pressure on leu next week," said
one dealer in Bucharest. "All is about next week's Fed's
printing press plus a good mood after U.S. non-farm payrolls
data."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.567 24.485 -0.33% +7.13%
Polish zloty <EURPLN=> 3.905 3.905 0% +5.1%
Hungarian forint <EURHUF=> 273.83 272.41 -0.52% -1.27%
Croatian kuna <EURHRK=> 7.348 7.34 -0.11% -0.53%
Romanian leu <EURRON=> 4.288 4.29 +0.05% -1.18%
Serbian dinar <EURRSD=> 107.21 107.36 +0.14% -10.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 64bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +96bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +391bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +367bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +327bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +564bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +524bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +466bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1515 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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emerging market news []
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Toby Chopra)
