* Forint worse off, zloty falls 1 pct on euro zone worry
* Hungary post-election rally fizzles after cbank attack
(Updates prices after Greece, Portugal downgrades)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, April 27 (Reuters) - Hungary's forint showed
its biggest daily drop this year on Tuesday, falling more than 2
percent to lead emerging Europe down as a post-election rally
fizzled and concerns rose over Greece's aid package.
Markets in debt-laden Greece took another battering on
Tuesday on the possibility Athens might not secure aid in time
to meet a debt deadline on May 19. []
The prospect 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 in Sunday's run-off vote won the
two-thirds majority needed for vital reforms. []
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 268.88 to the euro by
1558 GMT, hitting a nearly two-month low on stop losses.
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 1.4 percent to the weak side of 3.93 per
euro. The Czech crown <EURCZK=> and Romania's leu <EURRON=> fell
0.5-0.6 percent against the common currency.
Stock markets fell more than 1 percent, except for Budapest
<> which held up better with a 0.2 percent drop after
cutting losses late in the day.
Analysts say persistent uncertainty over Greece could affect
emerging Europe, especially if the euro drops more. Central
European currencies extended losses late Tuesday afternoon after
ratings downgrades for Greece and Portugal. []
"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=> 25.571 25.431 -0.55% +2.92%
Polish zloty <EURPLN=> 3.935 3.879 -1.42% +4.29%
Hungarian forint <EURHUF=> 268.88 263.18 -2.12% +0.55%
Croatian kuna <EURHRK=> 7.249 7.255 +0.08% +0.83%
Romanian leu <EURRON=> 4.134 4.115 -0.46% +2.5%
Serbian dinar <EURRSD=> 99.14 99.057 -0.08% -3.29%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -2 basis points to 99bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +82bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +75bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +372bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +318bps over bmk*
10-yr T-bond PL10YT=RR +8 basis points to +266bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +9 basis points to +448bps over bmk*
5-yr T-bond HU5YT=RR +9 basis points to +390bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +357bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1800 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
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(Reporting by Reuters bureaus, writing by Dagmara Leszkowicz
and Jason Hovet, editing by Stephen Nisbet)
