* GDP improves, but fiscal risks remain
* FX wipe out overnight drops
* Czech, Polish 5-year bond auctions watched
(Adds bonds, details)
PRAGUE, May 12 (Reuters) - Strengthening GDP readings in
central Europe's export-driven economies gave their currencies a
lift on Wednesday as market concerns about debt in the euro
zone persisted.
First quarter gross domestic product data showed Hungary
moved firmly out of recession and the Czech Republic's
industry-led recovery continued, helping the forint and crown
erase overnight losses.
The leu lagged slightly after data showed Romania's economy
shrank -- though not as sharply as expected -- in the first
quarter, leaving leeway for further rate cuts.
Markets took the data as a good sign, although analysts say
revisions were still possible and fiscal tightening this year
would act as a drag on any recovery.
The Czech crown <EURCZK=>, which has benefited from regional
cross-trades this week, rose 0.2 percent on the day against the
euro by 0754 GMT. Hungary's forint <EURHUF=> inched up 0.4
percent and the leu <EURRON=> was 0.1 percent stronger.
Poland's zloty <EURPLN=> led gains, rising 0.5 percent to
stay just above the 4.0 per euro support level.
"Hungary's (GDP) figure came in above expectations, thus the
whole region is supported," said Ulrich Leuchtmann, analyst at
Commerzbank in Frankfurt. "Nevertheless the euro story is still
the key for the region."
NOT CLEAR
Analysts expect central European currencies to gain this
year, boosted by rising exports to western markets, but also
warn any slowdown in the euro zone will be felt in the region.
The euro was firmer but remained under selling pressure on
Wednesday, with investors still sceptical about whether the euro
zone economies can deliver the drastic spending cuts and tax
increases needed to get their fiscal houses in order.
Markets rose at their fastest pace this year on Monday after
a $1 trillion rescue package to contain the Greek debt crisis,
but returning uncertainty caused a drop in volumes on Tuesday
and led to a correction and boosted in intra-region trade.
CEE stock markets rose up to 1 percent on Wednesday, with
only Budapest <> down and giving up more of its 10 percent
gain from Monday.
Central European bonds also strengthened. Czech and Polish
markets were looking to midday 5-year bond auctions to gauge
investors' appetite for debt.
"Any higher demand (at the Czech auction) at reasonable
prices is likely to be covered by the issuer with extra supply
over the original size, one of the things to watch as the
financing position is deteriorating further," Komercni Banka
dealers said.
The yield on the Czech benchmark bond due 2019 <CZ1002471=>
was down at 3.85 percent on Wednesday after rising around 25
basis points in the past three weeks.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.368 25.412 +0.17% +3.74%
Polish zloty <EURPLN=> 3.989 4.01 +0.53% +2.88%
Hungarian forint <EURHUF=> 273.44 274.52 +0.39% -1.13%
Croatian kuna <EURHRK=> 7.26 7.261 +0.01% +0.68%
Romanian leu <EURRON=> 4.173 4.175 +0.05% +1.54%
Serbian dinar <EURRSD=> 99.84 99.49 -0.35% -3.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 97bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +99bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +91bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +340bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +265bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +537bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +479bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +388bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1129 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 John Stonestreet)
