* FX around multi-month highs after FOMC
* Bonds gain, await Czech, Polish auctions
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, March 17 (Reuters) - A rise in risk appetite on
Wednesday pushed the Hungarian forint and Polish zloty near
highs last seen at the end of 2008.
The U.S. Federal Reserve's pledge to keep interest rates low
while sounding a positive note on the economic outlook cheered
markets, helping lift central European assets and extend sharp
gains made since the start of the year.
Strategists expect a recovery in export demand will boost
emerging EU currencies this year.
The zloty, backed by the only economy in the bloc to have
stayed out of recession last year, has outpaced peers this year
with a 6 percent rise against the euro, compared to 3-4 percent
appreciation for the forint, Romanian leu and Czech crown.
The forint rose 0.5 percent by 1058 GMT to bid at 262.63 to
the euro, slightly off a 15-month high hit earlier at 262.50.
The zloty <EURPLN=> added 0.2 percent to close in on a
15-month high it reached last week before the release of
industrial output data later in the day.
The crown <EURCZK=> was at 4-month highs around 25.4 per
euro, up 0.3 percent since Tuesday's domestic close. The leu
<EURRON=> rose 0.2 percent.
"Yesterday's Fed decision to keep rates unchanged boosted
the euro/dollar," analysts at Raiffeisen bank in Warsaw wrote in
a morning note. "The zloty used the opportunity to gain and we
expect it may rise to 3.85 at Wednesday's session."
The euro is central Europe's main reference currency and
units in the region usually track moves in the euro/dollar.
However, that correlation has been broken several times in
the past few weeks because investors took positions in the
region, favouring its better growth prospects and fiscal
position compared to those of euro zone periphery countries.
In Hungary, which faces parliamentary elections next month,
dealers said the forint could soon start to correct.
"I've always been a bull on the forint but the recent levels
are hardly justified by economic fundamentals, so I don't know
what to say," one Budapest-based dealer said.
BONDS UP
Bonds across the region firmed, supported by improving
sentiment and markets are awaiting Polish and Czech bond
auctions at midday. []
"If the demand is high, it would be another (positive)
signal coming from the debt market, that can help to set a
positive sentiment," said Krzysztof Izdebski, fixed income
dealer at PKO BP in Warsaw.
Czech bonds have rallied in the last month on
lower-than-expected supply in the first half, and investors bid
three times the offer at the 5-years inaugural auction last
month. []
Hungarian short-term bond yields hit five-year highs this
week on expectations of an interest rate cut, while in Poland
the shorter-end of the curve gained recently as dovish comments
of central bankers softened the outlook for a quick rate hike.
One of them, Andrzej Bratkowski, said earlier in the month
it was too early to talk about a rate hike and rates were likely
to stay flat this year. [] But analysts said dovish
comments have already been priced in and room for a further
yield decline on the short end was limited.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.395 25.478 +0.33% +3.63%
Polish zloty <EURPLN=> 3.869 3.876 +0.18% +6.07%
Hungarian forint <EURHUF=> 262.63 264.01 +0.53% +2.94%
Croatian kuna <EURHRK=> 7.255 7.251 -0.06% +0.75%
Romanian leu <EURRON=> 4.08 4.087 +0.17% +3.86%
Serbian dinar <EURRSD=> 99.6 99.85 +0.25% -3.73%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +8 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +123bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +106bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +383bps over bmk*
5-yr T-bond PL5YT=RR -10 basis points to +304bps over bmk*
10-yr T-bond PL10YT=RR -13 basis points to +250bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1200 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Dagmara
Leszkowicz; editing by Stephen Nisbet)
