* Czech c/a, output data boost crown, stocks
* Investors more hopeful as Latvia budget tensions ease
* Analysts say Polish IPO could help zloty
* Leu pressured by political uncertainty
(Updates prices, adds new comments)
By Jason Hovet and Gergely Szakacs
PRAGUE/BUDAPEST, Oct 12 (Reuters) - Hungary's forint and the
Polish zloty led a rebound among central European currencies on
Monday, while the Czech crown pared earlier gains posted after a
lower current account deficit.
Hopes for a resolution on further budget cuts in Latvia also
played into improved sentiment towards central Europe, although
analysts say the region looks more insulated from Latvia's woes
than before. []
By 1307 GMT, the zloty <EURPLN=> and the forint <EURHUF=>
were both 0.8 percent stronger versus the euro; some analysts
said flows before the initial public offering of Polish utility
PGE could add support to the zloty. []
The region's currencies were also boosted by gains in equity
markets, which extended rises in the afternoon as Budapest
<> and Prague <> both added over 2 percent.
"After the good news from Latvia we quickly firmed past
270," a dealer in Budapest said. "The forint should remain
strong for the rest of the day."
"Perhaps last week's retreat was a bit overdone."
Some dealers said the political turmoil in Poland could come
back to haunt the zloty later on.
Last week, Prime Minister Donald Tusk sacked three ministers
and the head of an anti-graft body to defuse a lobbying scandal
that has harmed his government's image. []
In Hungary, markets eye September inflation <HUCPIY=ECI>,
due out on Tuesday, for clues whether the central bank can ease
interest rates further following 2 percentage points of cuts to
7.5 percent at its last three meetings.
Analysts in a Reuters poll forecast consumer prices rising
at 5.3 percent, slightly up from 5 percent in August on the back
of a consumption tax hike effective from July.
The Czech crown <EURHUF=> benefited from tempered rate cut
expectations as August industrial output rose, while the current
account gap was smaller than expected. []
Dealers and analysts said the resulting gains pushed some
investors to profit taking. The crown <EURCZK=> bounced back
from a two-month low to trade half a percent up, then eased.
Bond yields were mostly down, with the 3-year <CZ1001887=>
at its lowest this year.
POLITICAL WORRIES WEIGH ON LEU
The leu <EURRON=> bucked the regional trend to ease versus
the euro on Monday, because of political risk.
Romania's parliament looks set to topple the minority
government on Tuesday in a no-confidence vote that deepens
political instability ahead of a presidential election and may
raise new concerns over the country's IMF aid.
The opposition have called the vote after Prime Minister
Emil Boc's coalition cabinet collapsed earlier this month,
plunging the country into a political crisis at a time when it
tries to shake off painful recession.
"The leu weakens because of fears over tomorrow's (Tuesday)
vote," one Bucharest-based dealer said.
"I don't think the market expects the government to fall,"
said Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank
in Bucharest.
"If the government falls it will definitely reflect on the
exchange rate and maybe even interest rates. The risk premium
for Romania will rise."
"The market has gotten used to the current situation and
political uncertainty but it doesn't want more uncertainty."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.81 25.922 +0.43% +3.65%
Polish zloty <EURPLN=> 4.244 4.279 +0.82% -3.04%
Hungarian forint <EURHUF=> 269.08 271.17 +0.78% -2.06%
Croatian kuna <EURHRK=> 7.25 7.253 +0.04% +1.59%
Romanian leu <EURRON=> 4.283 4.276 -0.16% -6.27%
Serbian dinar <EURRSD=> 92.824 92.89 +0.07% -3.6%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -24 basis points to 124bps over bmk*
7-yr T-bond CZ7YT=RR +8 basis points to +160bps over bmk*
10-yr T-bond CZ10YT=RR -20 basis points to +133bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +336bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +304bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +527bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +482bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +446bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1507 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Andy Bruce and toby Chopra)
