* East Europe FX supported by improved risk appetite
* Crown catching up with region
* June Polish retail sales up 0.9 pct, better than fcast
* Hungarian bonds hold onto gains as rate cut expected
* Hungary sells 12-month bills at 3.8 bid-to-cover
(Adds crown, Hungary's interest rate poll)
By Krisztina Than
BUDAPEST/PRAGUE, July 23 (Reuters) - Emerging Europe's
currencies firmed on Thursday, lifted by a still optimistic
global tone, with the Czech crown firming to the strongest level
so far this year.
The region's currencies, still recovering from sharp falls
last year and earlier this year, have risen this week helped by
successful bond auctions in Poland and Hungary, which showed an
increase in appetite for the region's debt.
The Czech crown has lagged the region for most of the week
but on Thursday it rose to a 7-month high, or 0.6 percent up on
the day to 25.625 to the euro <EURCZK=>, the highest since early
December, before retreating to 25.610 at 1030 GMT.
"The crown is catching up with regional peers, the zloty and
the forint, which appreciated faster in the beginning of the
week," said David Sykora, FX trader at bank CSOB. He added the
next key resistance level was around 25.500.
Hungary's bonds held onto recent sharp gains on rate cut
expectations and a bill auction was heavily oversubscribed.
A Reuters poll of analysts showed on Thursday Hungary's
central bank would cut rates by 50 basis points next Monday as
consolidation in the country's markets has opened room for
trimming the highest rate in the EU.[]
The forint and other assets are drawing support from last
week's successful eurobond issue.
Polish data on Thursday showed retail sales <PLPMIY=ECI>
rose 0.9 percent year-on-year in June after posting growth of
1.1 percent in the previous month, and were up 2.2 percent
month-on-month.[] Analysts projected retail sales
growth of 0.4 percent year on year for June.
The data did not have significant market impact but analysts
said they showed Poland's economy was in a better shape than
some of its peers in the region.
"This is another macroeconomic indicator that confirms the
relatively ... good state of the Polish economy, clearly better
than in Poland's regional peers, and thus another indicator
confirming the likelihood of unchanged interest rates at the
July Monetary Policy Meeting," Erste Group said in a note.
Hungary, whose debt markets collapsed when the financial
crisis last year, aims to boost forint-denominated debt issuance
after it successfully issued a 1 billion euro five-year eurobond
last week, Finance Minister Peter Oszko was quoted as saying on
Thursday. []
"Sentiment is bright right now, as is the weather, but
easily changeable," a Budapest based dealer said.
"In the near term... we still think that HUF should benefit
from high rates against an improving risk appetite backdrop. We
remain short EUR/HUF," Unicredit said in a note.
Dealers expected Hungary's forint to trade in a narrow range
between 270 and 273 versus the euro on Thursday.
Poland's zloty <EURPLN=> gained 0.3 percent, while the Czech
crown was also up 0.45 percent despite Finance Minister Eduard
Janota's prediction on Wednesday that its economy could contract
by nearly 4.3 percent this year -- nearly twice as much as
earlier expected. []
HUNGARY RATE CUT SEEN
Regional stocks also rose with Warsaw's main index WIG20
<> up 1 percent and Budapest up 1.3 percent at 0927 GMT.
Hungary's offer of 50 billion Hungarian forints ($261.2
million) worth of one-year Treasury bills at an auction
<HUAUCTION01> attracted very strong demand. The papers, which
got bids of 246 billion forints, were sold at an average yield
of 8.63 percent down from 9.11 percent at the last such tender
two weeks ago.
The debt agency sold 65 billion forints worth of bills.
"The results of the one-year Treasury bill auction will
nicely reflect how aggressive interest rate cut expectations
are," a fixed income trader said before the auction.
The Polish central bank at 1200 GMT releases minutes from
the Monetary Policy Council (MPC) sitting in June when the
10-strong panel decided to cut the main interest rate by 25
basis points to 3.50 percent.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.663 25.778 +0.45% +4.25%
Polish zloty <EURPLN=> 4.242 4.255 +0.31% -2.99%
Hungarian forint <EURHUF=> 270.9 272 +0.41% -2.71%
Croatian kuna <EURHRK=> 7.31 7.31 0% +0.75%
Romanian leu <EURRON=> 4.228 4.235 +0.17% -5.05%
Serbian dinar <EURRSD=> 92.84 92.847 +0.01% -3.62%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -21 basis points to 133bps over bmk*
4-yr T-bond CZ4YT=RR -3 basis points to +169bps over bmk*
8-yr T-bond CZ8YT=RR -6 basis points to +279bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -27 basis points to +708bps over bmk*
5-yr T-bond HU5YT=RR -61 basis points to +627bps over bmk*
10-yr T-bond HU10YT=RR -51 basis points to +529bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1123 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus, writing by Krisztina Than,
editing by Victoria Main)
