* IMF's Belka proposed as next Polish c.bank governor
* Czech crown underperforms on May 28-29 election worries
* Risk appetite improves after China comments
(Updates prices, adds detail on Czech election)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, May 27 (Reuters) - The Polish zloty led
gains in central Europe on Thursday as investors cheered the
nomination of a senior IMF official to head the central bank,
while the Czech crown lagged on rising pre-election uncertainty.
Poland's acting president Bronislaw Komorowski proposed
respected economist and former prime minister Marek Belka to
replace former central bank Governor Slawomir Skrzypek, who was
killed in a plane crash last month.
Investors welcomed the proposal, seen boosting central
bank's credibility and helping smooth recently strained
relations inside the institution and with the finance ministry
[].
Parliament looks likely to confirm him in the post, possibly
in early June.
AT 1407 GMT, the zloty <EURPLN=> rose 0.4 percent, while the
Hungarian forint <EURHUF=> and the Romanian leu <EURRON=> were
0.2 percent stronger.
"I think it's a very positive choice and hopefully some
degree of political neutrality can lead to a calming of
tensions," said Peter Attard Montaldo, economist at Nomura
International.
Recent comments by Polish officials about the zloty also
supported the currency, analysts said.
On Wednesday, two Polish central bankers and a deputy
finance minister sought to quash rumours the country was moving
towards a managed float of its zloty currency, saying the
currency remained free-floating. []
In April the central bank intervened for the first time in a
decade to counter zloty strength, and in May traders said the
finance ministry sold euros on the market to boost the currency.
The region also benefited from an improved risk appetite
after comments from a Chinese official calmed some concerns that
Beijing may be distancing itself from euro zone debt holdings.
Yields fell in Hungary and Poland, while stocks rose up to 4
percent across the region.
CZECH ELECTION
The Czech crown <EURCZK=> underperformed, falling
half-a-percent on the day as markets fear the outcome of
parliamentary polls this weekend could lead to a long period of
political wrangling that may delay much-needed fiscal cuts.
The leftist Social Democrats lead opinion polls but may find
it difficult to find coalition partners and may even be forced
into opposition.
"On balance, we see up to seven possible outcomes of
post-election bargaining," Citigroup said in a note. "As such,
there is a high level of uncertainty surrounding the final
outcome of these elections."
"Any majority government would be a positive for Czech
assets over the short- to mid-term, as fiscal consolidation
would be likely to materialise."
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For more stories on the Czech election, see []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The leu has also lagged recently as markets fear mass
protests over plans to cut wages and pensions could force the
government to back down on some of the measures, which are
crucial to secure further IMF-led aid.
Trade unions plan a general strike next month.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.65 25.518 -0.51% +2.6%
Polish zloty <EURPLN=> 4.088 4.105 +0.42% +0.39%
Hungarian forint <EURHUF=> 276.88 277.3 +0.15% -2.36%
Croatian kuna <EURHRK=> 7.263 7.27 +0.1% +0.64%
Romanian leu <EURRON=> 4.158 4.165 +0.17% +1.91%
Serbian dinar <EURRSD=> 102.68 102.91 +0.22% -6.62%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 121bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +151bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +135bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +409bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +380bps over bmk*
10-yr T-bond PL10YT=RR -6 basis points to +319bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -21 basis points to +559bps over bmk*
5-yr T-bond HU5YT=RR -21 basis points to +528bps over bmk*
10-yr T-bond HU10YT=RR -15 basis points to +460bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1607 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Marius Zaharia; Editing by Toby Chopra)
