* Hungary c.bank cuts key rate by 25 bps to 6.25 pct
* Forint leads gains, crowns dips in thin trading
* Bonds unchanged as market slows down for Christmas
(Adds Hungary's central bank, updates prices)
By Gergely Szakacs and Jana Mlcochova
BUDAPEST/PRAGUE, Dec 21 (Reuters) - Hungary's forint
<EURHUF=> led gains in central Europe on Monday, following a
surprise central bank decision to cut interest rates by 25 basis
points, less than markets had expected.
Analysts said the move signalled the bank had been made
cautious by a recent weakening of the forint in tandem with its
regional peers and uncertainties surrounding the 2010 budget
outlook.
Hungary's main rate <NBHI> is now at its lowest level since
June 2006, after policymakers trimmed borrowing costs by a
cumulative 325 basis points since July.
The forint <EURHUF=> firmed to trade up more than 1 percent
on the day, before shedding some of the gains. It traded at
274.6 per euro at 1423 GMT, or 0.9 percent up from Friday's
close. []
"The smaller cut seems to be a wise step," said Gyorgy
Barcza of K&H. "A smaller cut may help the forint regain some
strength after recent losses."
Bond yields were little changed in thin trade.
Poland's zloty <EURPLN=> also added 0.5 percent versus the
euro ahead of its last interest rate decision of the year on
Dec. 22 and 23. The Polish central bank is expected to leave
interest rates on hold until well into 2010 [].
The Czech crown <EURCZK=> bucked the trend to shed 0.1
percent against the euro, but dealers said there were no
fundamental drivers and the only factor seemed to be adjustment
of positions in major currencies.
The Czech central bank surprised markets last week by
cutting interest rates to a new record low of 1 percent, showing
concern about protracted economic weakness despite signs of
slightly higher price pressures. []
ROMANIA'S CONFIDENCE VOTE
The Romanian leu <EURRON=> was stable and may draw support
from expectations of pre-Christmas currency inflows from
Romanians working abroad. One in ten Romanians has left the
country in recent years in search of better living standards.
Markets are also eyeing a confidence vote on Wednesday on a
centrist cabinet unveiled by Prime Minister designate Emil Boc
on Sunday [], hopeful it will show a months-long
political deadlock is nearing an end.
Approval looks all but guaranteed since Boc's coalition has
five votes more than the 236-seat majority needed and the
country sold more one-year treasury bills than planned a at an
auction earlier on Monday -- an indication of improving demand.
"It seems markets are pricing in some easing in rates after
we will have a government ... and pressure on the leu subsides,"
one trader said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.305 26.272 -0.13% +1.7%
Polish zloty <EURPLN=> 4.186 4.208 +0.53% -1.7%
Hungarian forint <EURHUF=> 274.26 276.67 +0.88% -3.91%
Croatian kuna <EURHRK=> 7.285 7.285 0% +1.1%
Romanian leu <EURRON=> 4.214 4.21 -0.09% -4.74%
Serbian dinar <EURRSD=> 96.23 96.18 -0.05% -7.01%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -49 basis points to 83bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +93bps over bmk*
10-yr T-bond CZ10YT=RR -2 basis points to +80bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +345bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +303bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +6 basis points to +557bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +503bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +441bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1623 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, Writing by Gergely Szakacs and
Jana Mlcochova, editing by Patrick Graham)
