* Zloty leads gains on economic outlook
* Leu weaker before expected interest rate cut
* Czechs to issue less foreign bonds than plan allows
(Adds bonds, stocks)
By Jason Hovet
PRAGUE, Feb 3 (Reuters) - Central European currencies edged
higher on Wednesday, extending this week's gains on hopes of a
stronger economic recovery and despite worries the market might
be heading for a correction.
The zloty <EURPLN=> led with a 0.3 percent rise, bidding at
3.968 to the euro after Polish TVN CNBC reported the country's
convergence plan, due to be approved on Wednesday, sees the
economy expanding 3.4 percent this year. []
The Hungarian forint <EURHUF=> added 0.3 percent to 269.35
per euro and the Czech crown <EURCZK=> was up 0.2 percent by
0948 GMT. Central European stocks also edged higher led by a 0.9
percent rise in Budapest <>.
However, Romania's leu <EURRON=> pulled back from its own
13-month high on Wednesday, edging 0.3 percent lower before an
expected 50 basis point interest rate cut to 7 percent, to
stimulate the battered economy. []
Poland was the only central European country to stay out of
recession last year, and the growth estimate was higher than 1.2
percent seen in the 2010 budget law. Higher growth would help
Warsaw's drive to keep rising public sector debt in check.
The zloty is tapped by strategists as a central European
outperformer this year and has led gains since the start of the
year with a 3.5 percent rise, breaking the psychological 4.0 per
euro level this week to reach a 13-month high.
But analysts have warned worries over shaky euro zone
members like Greece, which is battling spiralling budget
deficits, could again hit markets in emerging European Union
members in the short-term.
Markets, though, have mostly shaken off those worries, with
Warsaw's privatisation plans boosting the zloty. Bookbuilding on
the sale of a 16-percent state stake in electricity provider
Enea is expected to start this week. []
"Cash is all the time flowing into Poland for this year's
privatisation projects. I think that 3.90 against the euro is
the goal that investors are aiming at," said a Warsaw dealer.
"The risk of a correction is always there but I don't think
it is big because some players are now closing their bets on a
weaker zloty."
CENTRAL BANKS ON DECK
Romania's currency has kept pace with zloty gains this year
after a new government put together an austere 2010 budget that
freed a chunk of the country's IMF aid that had been delayed.
Fitch ratings agency revised Romania's outlook to stable
from negative on Tuesday. []
"An outlook upgrade had been expected after the IMF deal was
put back on track," said one dealer in Bucharest. "Today,
there's no big scope for firming steeply as the central bank
will further cut rates."
The Czech central bank is expected to hold interest rates at
a record low of 1 percent on Thursday. Markets will mainly watch
for clues as to when policymakers will begin to tighten policy.
Bonds were mixed on Wednesday, also taking in stride Finance
Minister Eduard Janota's comments late on Tuesday that 1-2
billion euros worth of foreign-currency bonds would be issued in
2010, below the ministry's own ceiling. []
The news implied higher domestic borrowing as the Czechs
face record high borrowing this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.923 25.969 +0.18% +1.52%
Polish zloty <EURPLN=> 3.968 3.981 +0.33% +3.43%
Hungarian forint <EURHUF=> 269.35 270.23 +0.33% +0.37%
Croatian kuna <EURHRK=> 7.314 7.314 0% -0.07%
Romanian leu <EURRON=> 4.094 4.083 -0.27% +3.5%
Serbian dinar <EURRSD=> 98.67 98.51 -0.16% -2.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +8 basis points to 97bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +143bps over bmk*
10-yr T-bond CZ10YT=RR -5 basis points to +124bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR -10 basis points to +319bps over bmk*
10-yr T-bond PL10YT=RR -11 basis points to +281bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +530bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +486bps over bmk*
10-yr T-bond HU10YT=RR -8 basis points to +432bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1048 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Toby Chopra)
