* Zloty leads gains on economic outlook
* Leu weaker, but steady after interest rate cut
* Czechs to issue less foreign bonds than plan allows
(Updates with Romanian cbank)
By Jason Hovet
PRAGUE, Feb 3 (Reuters) - Poland's zloty rose on Wednesday
on the back of a report that showed growth this year could be
much higher than expected, while Romania's leu fell as the
central bank knocked half a point off base interest rates.
Central European currencies have been gaining this week
thanks to hopes of a stronger economic recovery that makes them
look like better bets than many euro zone states, although there
are worries the market might be heading for a correction.
The zloty <EURPLN=> added 0.2 percent to bid at 3.975 to the
euro, but off earlier highs, as Polish TVN CNBC reported the
country's convergence plan for joining the euro, due to be
approved on Wednesday, sees the economy growing 3.4 percent this
year -- much higher than previous estimates. []
The Hungarian forint <EURHUF=> added 0.4 percent to 269.2
per euro and the Czech crown <EURCZK=> was up 0.2 percent by
1141 GMT. Central European stocks also edged higher led by a 0.7
percent rise in Budapest <>.
The leu <EURRON=> pulled back from its own 13-month high,
edging 0.3 percent lower on the day but steady after the central
bank, as expected, cut rates to 7 percent. []
Poland was the only central European country to stay out of
recession last year, and the growth estimate compared to the 1.2
percent written in its 2010 budget. Higher growth would help
Warsaw's drive to keep rising public sector debt in check.
The zloty is tapped by strategists as an outperformer this
year and has led gains since the start of the year with a 3.5
percent rise, breaking the psychological 4.0 per euro level this
week to reach a 13-month high.
But analysts have warned worries over shaky euro zone
members like Greece, which is battling spiralling budget
deficits, could again hit markets in emerging European Union
members in the short-term.
Markets, though, have mostly shaken off those worries, with
Warsaw's privatisation plans boosting the zloty. Bookbuilding on
the sale of a 16-percent state stake in electricity provider
Enea is expected to start this week. []
"Cash is all the time flowing into Poland for this year's
privatisation projects. I think that 3.90 against the euro is
the goal that investors are aiming at," said a Warsaw dealer.
"The risk of a correction is always there but I don't think
it is big because some players are now closing their bets on a
weaker zloty."
CENTRAL BANKS ON DECK
Romania's currency has kept pace with zloty gains this year
after a new government put together an austere 2010 budget that
freed a chunk of the country's IMF aid that had been delayed and
opened room for further. []
"We would expect the central bank to be pretty cautious
going forward," said Lars Christensen, Danske Bank analyst.
"Rates are at a relative low level taking the overall risk
for the economy into account and the risk of spill-over from the
Greek situation could also trigger pressure on the leu."
The Czech central bank is expected to hold interest rates at
a record low of 1 percent on Thursday. Markets will mainly watch
for clues as to when policymakers will begin to tighten policy.
Bonds were mixed on Wednesday, also taking in stride Finance
Minister Eduard Janota's comments late on Tuesday that 1-2
billion euros worth of foreign-currency bonds would be issued in
2010, below the ministry's own ceiling. []
The news implied higher domestic borrowing as the Czechs
face record high borrowing this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.915 25.969 +0.21% +1.56%
Polish zloty <EURPLN=> 3.975 3.981 +0.15% +3.25%
Hungarian forint <EURHUF=> 269.22 270.23 +0.38% +0.42%
Croatian kuna <EURHRK=> 7.314 7.314 0% -0.07%
Romanian leu <EURRON=> 4.094 4.083 -0.27% +3.5%
Serbian dinar <EURRSD=> 98.83 98.51 -0.32% -2.98%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +6 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR -8 basis points to +137bps over bmk*
10-yr T-bond CZ10YT=RR -7 basis points to +122bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1242 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Patrick Graham)
