* FX retreats on global stocks fall, Czech rate cut
* Hungary bonds weaker, Polish bonds shrug off FX decline
* CEE stocks also drop after rally
(Adds bonds, analyst, stock markets)
By Gergely Szakacs
BUDAPEST, Aug 7 (Reuters) - Hungary's forint and the Polish
zloty led a retreat in central Europe on Friday as aversion to
higher risk and doubts over the breadth of an economic recovery
brought most regional currencies under pressure.
Data released earlier this week, such as improving Hungarian
output figures and rising Czech exports, hinted at a possible
pickup in activity among eastern Europe's export-driven
economies, hammered by a collapse in demand in western Europe.
[]
But a retreat in global stock markets, a surprise rate cut
in the Czech Republic, a correction to recent gains in the
zloty, and the break of a key level in the forint weakened most
regional currencies by Friday.
At 0857 GMT, the forint <EURHUF=> was down 0.9 percent,
while the zloty <EURPLN=> was off 0.65 percent to the euro.
"We moved clearly above the 270 threshold and that puts the
forint under selling pressure," a Budapest-based currency dealer
said.
"And most market factors are all pointing towards easing:
global stocks are down, the dollar has firmed against the euro
and other emerging market currencies are also down. So I think
we're looking at a range of 270 to 272.40 today."
However, he added that Thursday's better-than-expected U.S.
jobs data could keep sentiment from souring too much and
Friday's monthly employment report, if it proves positive, might
even turn the market around.
Poland's zloty, seen by markets as central Europe's best
performing currency over a 12-month span due to sounder economic
fundamentals [], also edged lower in a correction to
hefty gains posted recently.
"We have a correction on the eur/pln, but the market has
expected it. It's because of the falling euro/dollar and easing
pressures on strengthening currencies in the region," said
Robert Kesicki, dealer at Kredyt Bank in Warsaw.
"I think we can even reach 4.20 (to the euro) but I expect
the Polish unit to come back to its appreciation trend further."
The crown <EURCZK=>, which on Thursday recouped modest
losses after the central bank cut rates to a new low of 1.25
percent, was steady.
In rare comments on specific exchange rate levels, Czech
central bank governor Zdenek Tuma told local radio on Friday a
stronger crown exchange rate between 25 and 26 to the euro would
not be a big problem for the domestic economy. []
"It is quite possible that the CNB considered the speed of
the crown adjustment as a possible drag on the economic
recovery. While there was some improvement in industrial
production in recent months, retail sales remained weak and
credit growth continued to slow," UBS said in a note.
STOCKS DOWN
The region's stock markets also fell, with the Budapest
bourse <> down 1.6 percent and Warsaw <> down 1
percent at 0900 GMT.
Hungarian government bond yields rose about 10 basis points,
while Polish bonds were unchanged despite a falling zloty.
Analysts said the market eyes the key data coming from the
United States later in the day.
"If today's U.S. (payrolls) data affects the zloty, it is
likely to pressure the asset swap curve, pushing down the
country's papers," said one dealer at a Warsaw-based bank.
On Czech money markets, rates were holding steady on Friday
after a small bounce lower late on Thursday following the
central bank's press conference.
"Prediction for today is once again tough; a logical move
would be for a drop in short rates and steepening of the curve,
but yesterday's action suggests that such a scenario would only
happen slowly rather than immediately," Komercni Banka dealers
said in a morning note.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.9 25.9 0% +3.29%
Polish zloty <EURPLN= > 4.167 4.14 -0.65% -1.25%
Hungarian forint <EURHUF=> 271.8 269.33 -0.91% -3.04%
Croatian kuna <EURHRK=> 7.33 7.334 +0.05% +0.48%
Romanian leu <EURRON=> 4.212 4.2 -0.28% -4.69%
Serbian dinar <EURRSD=> 93.29 93.29 0% -4.08%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to 128bps over bmk*
4-yr T-bond CZ4YT=RR +4 basis points to +114bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +252bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +341bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +286bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +265bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -24 basis points to +672bps over bmk*
5-yr T-bond HU5YT=RR -58 basis points to +613bps over bmk*
10-yr T-bond HU10YT=RR -47 basis points to +527bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1055 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Gergely Szakacs
and Krisztina Than; editing by Richard Balmforth)
