* Romanian cbank delivers expected 50 bps rate cut
* Politics may make further cuts more cautious -analysts
* Zloty slides, cbank warns of debt rising past legal limit
* Moody's says may revise Hungary's negative rating outlook
(Updates prices, adds new comments)
By Marton Dunai and Gergely Szakacs
BUDAPEST, Sept 29 (Reuters) - Romania's leu <EURRON=> firmed
slightly on Tuesday after the central bank cut interest rates by
an expected 50 basis points, while the zloty <EURPLN=> weakened
on concerns over Poland's mounting public debt.
The leu was up about 0.3 percent versus the euro at 1237 GMT
after the central bank eased its key interest rate to 8 percent,
with many economists forecasting further easing to combat a deep
economic downturn engulfing most central European economies.
However, some analysts warned future cuts may be hampered by
concerns over the stability of Bucharest's coalition government
after the prime minister's decision to replace a key minister
with a candidate from his own centrist party. []
Dealers in Bucharest said the leu was helped by central bank
intervention for a second day in a row this week, to counter
weakening pressure from the rate cut and political instability.
"The central bank is intervening through commercial banks,
they probably sold another 200 million euros," one
Bucharest-based dealer said.
The zloty shed about 0.6 percent in afternoon trade after
the Warsaw central bank said in a report that the country's debt
could top the constitutional cap of 55 percent of gross domestic
product and approach 60 percent next year. []
"One big flow went through the market," said one
Warsaw-based dealer. "It is possible that it was a reaction on
the central bank's report about the deficit."
However, Poland's economy minister said the current zloty
level versus the euro was "satisfactory" as it helped support
exports [], while the finance minister said the
currency could gain in 2009-2010 [].
HUNGARY MAY COME OFF IMF AID
The Hungarian forint <EURHUF=> eased about 0.1 percent,
paring modest gains posted earlier after Moody's said in a
report it might change Hungary's negative rating outlook if the
country continues fiscal consolidation. []
The currency reacted little to comments by central bank
Deputy Governor Ferenc Karvalits, saying Hungary should not need
to use the rest of its IMF-led rescue package, though its
recovery remained fragile. []
Karvalits said the central bank, which cut interest rates by
another 50 basis points to 7.5 percent on Monday, would continue
to aid recovery but further easing would have to remain
predictable and gradual.
"We have firmed a bit after yesterday's rate cut, many
expected 100 bps so the carry remained high, the question is
what the market prices in for the next meeting," a
Budapest-based currency dealer said.
For more stories from the Reuters Central Europe Investment
Summit, please see []
The Czech crown <EURCZK=>, usually seen as a safe haven in
the region, was 0.2 percent stronger after a Monday holiday.
On Tuesday the Czech interim government approved the 2010
state budget draft with a deficit of 162.7 billion crowns,
cutting the shortfall by 2.2 percentage points of GDP to curb
the budget impact of the country's worst recession in a decade.
But the finance minister said the fiscal cuts would come at
the cost of a further 0.5 percent decline in economic output
next year. [] Nearby Hungary also expects its
economy to shed a further 0.9 percent next year.
In Lithuania, troubles continued as Moody's cut the
country's ratings for the second time this year and warned of
the deep recession's pressures on government finances in the
Baltic nation. [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.149 25.205 +0.22% +6.38%
Polish zloty <EURPLN=> 4.215 4.19 -0.59% -2.37%
Hungarian forint <EURHUF=> 269.59 269.27 -0.12% -2.24%
Croatian kuna <EURHRK=> 7.267 7.269 +0.03% +1.35%
Romanian leu <EURRON=> 4.186 4.2 +0.33% -4.1%
Serbian dinar <EURRSD=> 92.897 92.67 -0.24% -3.68%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 164bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +180bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +176bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +539bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +506bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +445bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1459 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, Writing by Marton Dunai and
Gergely Szakacs; Editing by Andy Bruce)
