* Euro declines halt, manufacturing outlook better
* Hungarian bond yields drop from high, Polish sale strong
* Pension plans eyed in region
(Updates after Polish auction)
By Jason Hovet
PRAGUE, Dec 1 (Reuters) - Emerging European currencies rose
on Wednesday, helped by a better outlook from manufacturing
surveys and a pause in the euro's decline.
Mounting worries that the euro zone's debt crisis will not
end with a bailout of Ireland have sent emerging Europe's main
reference currency, the euro, sharply lower against the dollar
-- a currency pair the region typically tracks.
Planned pension changes to help shore up the budget in
Hungary, along with an ongoing battle between the government and
central bank, have also hit investor sentiment in the region.
Markets were digesting signs that Poland could also
introduce significant pension reforms as part of efforts to rein
in public debt. []
The government may temporarily reduce the amount of cash it
transfers into private pension funds by partly substituting
government bonds, a senior government source told Reuters.
Analysts said this could hit equity markets by reducing
money available, while warning accounting tricks could unnerve
investors in the current environment. Poland is due to unveil
changes to its private pension funds during the next few weeks.
Demand for a 2-year bond held strong at an auction on
Wednesday and the average yield rose to 4.798 percent from 4.595
percent seen in an October sale. []
The zloty <EURPLN=> rose a touch and was just off the key
4.0 per euro level. The Hungarian forint <EURHUF=> added half a
percent to firm to the strong side of the 280 per euro level.
Both currencies were still down as much as 1.5 percent from
a week ago and they still trended toward weakness.
The Czech crown <EURCZK=> added 0.2 percent after bouncing
off the psychological 25 per euro level, and the Romanian leu
<EURRON=> was steady at 1223 GMT.
Stock markets rose around 2 percent.
"Everything is up with the euro/dollar," said Roman Fol, a
trader at Raiffeisenbank in Prague. "The market is still
nervous, so there is bigger room for weakening than
strengthening."
Hungarian government bond yields dropped by about 20 basis
points after touching 15-month highs this week after a surprise
interest rate hike on Monday by the central bank in Hungary, the
first to begin undoing two years of crisis-driven loosening.
PMI STRONG
Poland's Purchasing Managers' Index (PMI) rose to a 6-1/2
year high, a day after third-quarter economic growth came in
better than forecast. The data added to arguments for the
central bank to start tightening policy. []
Czech PMI crept up and was among the strongest in the
region. [] Hungary's PMI, calculated under a
different methodology, also rose. []
The European Commission has forecast a steady recovery in
central Europe, which relies a lot on trade, especially with
Germany, which is expected to lift the region's currencies over
the next year. [] <CEEFXPOLL01>
But investor anxieties have been stoked in Europe's emerging
markets by Hungary's centre-right Fidesz government.
The government has given taxpayers until the end of January
to return to the state pension scheme or face drastic cuts in
future entitlements, a move that private funds have denounced as
"outright blackmail". []
Nigel Rendell, an RBC strategist, said Polish proposals to
substitute bonds for some cash to pension funds could also raise
nerves among investors.
"I would think in overall terms for bond investors, if the
government is doing this kind of trick, it's very difficult to
argue that it's going to be positive," he said. "Slight of hand
is not welcome, really, in financial markets."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.898 24.955 +0.23% +5.7%
Polish zloty <EURPLN=> 4.02 4.022 +0.05% +2.09%
Hungarian forint <EURHUF=> 279.7 281.23 +0.55% -3.34%
Croatian kuna <EURHRK=> 7.422 7.423 +0.01% -1.52%
Romanian leu <EURRON=> 4.295 4.296 +0.02% -1.34%
Serbian dinar <EURRSD=> 107.18 107.35 +0.16% -10.54%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 97bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +81bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +100bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR -8 basis points to +369bps over bmk*
10-yr T-bond PL10YT=RR -21 basis points to +320bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -24 basis points to +687bps over bmk*
5-yr T-bond HU5YT=RR -29 basis points to +633bps over bmk*
10-yr T-bond HU10YT=RR -28 basis points to +545bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1321 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Patrick Graham)
