* ECB lifts rates as expected, does not signal more
* Zloty seen as outperformer on c.bank tightening
* Hungary bond auction goes well
(Updates throughout)
By Radu Marinas and Jason Hovet
BUCHAREST/PRAGUE, April 7 (Reuters) - The Polish zloty
rebounded a touch on Thursday after the European Central Bank
raised interest rates but said the hike was not necessarily the
first in a series, limiting pressure on Central European
currencies.
The ECB announced the first increase in its key interest
rate since July 2008 in a move that had been flagged to markets
since its last meeting a month ago. Dealers said the hike had
been fully priced into markets in emerging Europe, where rates
are also rising. []
Poland and Hungary have already reversed the looser policy
that cushioned their economies during the economic crisis, while
markets are anticipating a first Czech hike by mid-year.
A Reuters poll on Thursday showed the zloty would outperform
emerging European peers in the next year thanks to Poland's
tightening cycle, which has brought two quarter percentage point
interest rate rises already this year. []
Analysts said the signal that Thursday's ECB rate rise was
not intended as the first in a series, and hence that the
differential with regional rates was not set to shrink further,
had helped keep pressure off central European currencies.
[]
This particularly benefited the zloty <EURPLN=>, which
turned positive on the day to gain 0.1 percent to 3.969 to the
euro. The Polish unit also rose against peers, hitting a session
high of 6.15 crowns from a morning low of 6.10 <PLNCZK=R>.
"If the ECB would have signalled the start of a speedy rate
hiking cycle, it certainly would have not been from a carry
perspective good for the zloty," said Ulrich Leuchtmann, head of
foreign exchange research at Commerzbank in Frankfurt.
"It's also good news from the real economic side ... We keep
our very bullish view on the German economy, and this is a
positive signal for the Polish economy and the zloty."
The carry trade involves borrowing where interest rates are
low and using funds raised to invest in higher-yielding assets.
Poland's benchmark interest rate currently stands at 4
percent, versus 1.25 percent in the euro zone and 0.75 percent
in the Czech Republic.
By 1346 GMT, the Hungarian forint <EURHUF=> had shed half a
percent, and the Czech crown <EURCZK=> was 0.15 percent down.
The Romanian leu <EURRON=> was marginally down on the day
after comments by central bank Governor Mugur Isarescu that
current interest rates are at an adequate level and are not
hurting the country's economic recovery. []
Regional bourses were mixed, with only Budapest <> and
Bucharest <> gaining.
RATE OUTLOOK
Hungary's central bank looks to be on hold after three
quarter-point hikes between November and January that brought
its main interest rate to 6 percent.
Hungary sold 45 billion forints ($245 million) worth of
government bonds at an auction on Thursday. []
Its debt market has been bolstered by an improving economic
outlook and fiscal reform plans, while the forint is at 11-month
highs. []
Elsewhere, the Czech crown was resilient after central
banker Kamil Janacek said he saw enough factors for a rise from
record low interest rates at a meeting in May. []
His fellow rate-setter Pavel Rezabek had earlier said rates
could rise in May if upside CPI risks materialise.
"Considering both comments, we still do not believe that a
rate hike is imminent," Danske Bank said in a morning note.
Twelve of 19 analysts in a Reuters poll predicted the first
Czech hike would come by June.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.433 24.396 -0.15% +2.32%
Polish zloty <EURPLN=> 3.969 3.972 +0.08% -0.28%
Hungarian forint <EURHUF=> 264.44 263.2 -0.47% +5.12%
Croatian kuna <EURHRK=> 7.37 7.368 -0.03% +0.14%
Romanian leu <EURRON=> 4.117 4.105 -0.29% +2.82%
Serbian dinar <EURRSD=> 101.78 101.82 +0.04% +4.07%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to -7bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +49bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +62bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +442bps over bmk*
5-yr T-bond HU5YT=RR +9 basis points to +408bps over bmk*
10-yr T-bond HU10YT=RR +8 basis points to +363bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1547 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus; Writing by Radu Marinas and
Jason Hovet; Editing by Catherine Evans)
