* Forint rebounds, gains seem limited
* Leu up a touch after Senate backs VAT hike
* Long-end Polish bonds firmer before switch tender
(Updates throughout)
By Jason Hovet
PRAGUE, Aug 25 (Reuters) - The forint erased morning gains
on Wednesday after the Hungarian Economy Ministry said the
country was not aiming for a new International Monetary Fund
loan agreement.
Other emerging European currencies got a lift from the
improving economic outlook in trade partner Germany, but the
forint fell almost half a percent after the midday statement to
trade down on the day but off Tuesday's lows.
The economy ministry, clarifying comments from late on
Tuesday, said on Wednesday that autumn talks with the IMF would
be a regular country review and that a new loan was not needed
after an existing deal expires later this year. []
The latest statement came after ruling Fidesz party
Vice-Chairman Lajos Kosa said on TV2 in the morning that Hungary
will stay in touch with the IMF and it will negotiate with the
European Union about an economic and fiscal path that would be
acceptable to the country. []
Many investors have ditched Hungarian assets this week
because of risk aversion, and analysts have said a new aid
safety net would help cushion Hungarian financial markets.
"The forint fell after the Economy Ministry said there will
be no new (financing) deal with the IMF," one Budapest-based
dealer said. "The forint has become quite volatile... but I
don't think that it would break through 286 (to the euro)."
The forint fell to three-week lows around 286 per euro this
week after the central bank unveiled dimmer growth prospects on
Monday and markets remain wary over the lack of clarity
regarding Hungary's 2011 budget plans.
Hungarian bond yields jumped as much as 10 basis points
after the ministry stratement. The forint <EURHUF=> fell 0.2
percent on the day to bid at 283.45 to the euro by 0943 GMT.
RBC strategist Nigel Rendell said the forint would stay in
the 280-290 per euro range in the near term.
"The government has blown hot and cold with the IMF. The
market will only be happy with a hard deal in place," RBC
strategist Nigel Rendell said.
VOTES AHEAD
European governments are seeking to cut state budget
deficits to meet EU criteria and to please investors, but must
also balance a fragile economic recovery that is starting to
slow.
Hungary's centre-right Fidesz government, which won a
general election this year on a pro-growth strategy, faces
municipal elections on Oct. 3 and is viewed as unlikely to lay
out its 2011 budget plans ahead of the vote.
Hungary has a deficit target of 3.8 percent of GDP for this
year, which is one of the lowest in the EU.
Poland faces likely record borrowing this year. State bonds
firmed on Wednesday before an offer of 5- and 10-year bonds in
exchange for 2010 papers, and dealers expected heavy demand due
to attractive yields compared to German papers.
The Polish zloty <EURPLN=> rose 0.2 percent but the Czech
crown <EURCZK=> dipped 0.2 percent. Dealers said the zloty
benefited from cross trades favouring it over the Czech unit.
In Romania, the leu <EURRON=> inched up 0.1 percent after
the upper house of parliament backed a hike in value added tax
(VAT) viewed as vital to keeping an IMF-led rescue on track, but
the government faces a tight parliamentary vote next month.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.92 24.866 -0.22% +5.61%
Polish zloty <EURPLN=> 3.999 4.008 +0.23% +2.63%
Hungarian forint <EURHUF=> 283.45 282.75 -0.25% -4.62%
Croatian kuna <EURHRK=> 7.27 7.28 +0.14% +0.54%
Romanian leu <EURRON=> 4.234 4.238 +0.09% +0.08%
Serbian dinar <EURRSD=> 105.19 105.26 +0.07% -8.85%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +18 basis points to 134bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +114bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +116bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +391bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +379bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -20 basis points to +575bps over bmk*
5-yr T-bond HU5YT=RR -12 basis points to +546bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +479bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1147 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 Stephen Nisbet)
