(Recasts, changes dateline, updates prices, comments)
By Balazs Koranyi and Marius Zaharia
BUDAPEST/BUCHAREST, Nov 26 (Reuters) - A quarter-point
Polish rate cut on Wednesday failed to stir the region's markets
as dealers said the cut had largely been priced-in despite
coming earlier than many analysts had earlier predicted.
Analysts had almost unanimously expected the benchmark rate
to stay unchanged but worsening growth prospects and an
improvement in the outlook for inflation cleared the way for
policymakers to follow other central banks in easing.
The Polish zloty <EURPLN=>, already stronger before the rate
move, hung on to its gains after the announcement to stay
Central Europe's biggest winner on Wednesday while Romania's leu
<EURRON=> fell back.
The zloty had firmed throughout the day, in part on pent up
anticipation ahead of the rate move, but at 1400 GMT it traded
at 3.774 versus the euro, virtually unchanged from early in the
day.
"(The cut) is a move in the right direction," David Hauner,
an emerging market strategist at Bank of America said. "Clearly
the economy is weakening rapidly and other central banks are
cutting rates."
Poland's central bank lowered its benchmark rate by 25 basis
points to 5.75 percent to fight economic slowdown
[].
"The council wanted to signal that it is active in a crisis
situation, faced with rising risks to growth," Grzegorz
Maliszewski, the Chief Economist at Millennium Bank said.
LEU DOWN
Elsewhere in the region, the Czech crown <EURCZK=> was up
0.24 percent, the Romanian leu <EURRON=> fell 1.18 percent, the
Hungarian forint <EURHUF=> was down 0.37 percent and the Serb
dinar was up 0.16 percent.
The leu continued on a weakening path from earlier this week
as high household demand, still not quelled by tighter liquidity
conditions, stimulated importers to buy euros.
Romania is one of the domestic demand-driven economies in
the region, unlike others that heavily rely on their exports,
which has triggered a vast expansion of its current account
deficit, expected at around 14 percent of GDP this year.
"With foreign investors on the sidelines, commercial orders
from retailers were driving the market today," one dealer said.
The Czech crown gained, helped by the dollar's overnight
drop.
Czech bonds were quiet, while interest was low for a new
three-month repo facility that takes state bonds as collateral.
"I didn't expect strong demand. Domestic banks are still
cash-rich," a fixed income trader said, adding interest was also
dampened by expectations that borrowing rates are likely to fall
in coming months.
Most emerging European currencies have gained this week,
lifted by a stock market rally after news of a rescue package
for Citigroup and new U.S. plans to stimulate the economy.
But worries returned on Wednesday, as investors doubted that
successive U.S. steps aimed at restoring confidence in financial
markets, including the latest $800 billion plan to boost
consumer lending, would be sufficient.
"We have to remain sceptical," Commerzbank said in a
research note. "It seems that pay time for the U.S. economy is
unavoidable ... for global investors this means risk appetite
will probably not come back big style."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.113 25.173 +0.24% +5.22%
Polish zloty <EURPLN=> 3.775 3.81 +0.92% -4.85%
Hungarian forint <EURHUF=> 261.13 260.16 -0.37% -3.27%
Croatian kuna <EURHRK=> 7.14 7.15 +0.14% +2.55%
Romanian leu <EURRON=> 3.848 3.803 -1.18% -7.48%
Serbian dinar <EURRSD=> 88.507 88.647 +0.16% -12.38%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -2 basis points to 161bps over bmk*
5-yr T-bond CZ5YT=RR -6 basis points to +142bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR -10 basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +273bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -25 basis points to +963bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +917bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +584bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1516 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters bureaus, Writing by Balazs Koranyi and
Marius Zaharia; Editing by Patrick Graham)
(Reporting by Balazs Koranyi)
