* Lower end-year liquidity raises chances of swings
* Hungary may see more rate hikes
* Crown could underperform due to low rates
PRAGUE, Dec 10 (Reuters) - The Polish zloty led small
currency gains in central Europe early on Friday, with dwindling
liquidity due to year end settling of accounts opening the way
for potential larger swings.
Central European markets were largely unfazed by the
downgrade of Ireland by three notches by Fitch on Thursday, with
the Hungarian and Polish currencies underpinned by hawkish
comments form their central bankers.
The zloty was up by 0.3 percent against the euro and 0.9
percent to the dollar in early Friday trade at 4.0280 and 3.0346
respectively, before giving up some of the gains.
"It's the end of the year and investors are closing their
positions. It's unclear how the situation with euro/dollar,
Ireland and the Korean peninsula will develop," said a
Warsaw-based currency dealer.
"The risk of serious, unexpected changes is strengthened by
disappearing liquidity. So I see the zloty moving today in the
band of 4.0150 and 4.0550."
Next week, advisers to the Polish prime minister should be
ready to present proposals to changes in the pension law that
are expected to reduce the amount of state transfers into
private pension funds, helping the government boost budget
revenues. The plans have raised some uncertainty over the impact
on funds' investments.
INFLATION
Data also showed on Friday that Hungarian consumer prices
grew by 4.2 percent year-on-year in November, in line with
forecasts, extending expectations that the central bank may be
readying for more tightening after a surprise hike on Nov. 29.
The Hungarian central bank has been locked in what some
analysts call policy battle with the government. The market saw
the hike as a response to the country's risk profile.
"The data in itself cannot decide whether the 2011 inflation
path will be better or worse than the central bank's pessimistic
forecast, so more rate hikes could be forthcoming," said Zoltan
Arokszallasi of Erste Bank.
"The chance of a rate hike is greater now than the chance of
the central bank holding rates in December."
The forint dipped 0.1 percent to 277.55 <EURHUF=> by 0845
GMT. Hungary's right-of-centre government will also push through
a law on transferring pension savings to the state on Monday, an
unorthodox moved that has upset investors.
Hungary is effectively forcing millions of private pension
fund members with assets worth some 3 trillion forints to move
into the state-run pension system by Jan. 31.
The Czech crown was flat at 25.09 to the euro <EURCZK=>,
having underperformed the region in the past days on the back of
an outlook for an extended period of record low interest rates.
"We are looking for this trend to continue, mainly on the
short-term horizon as the crown will increasingly become a
regional funding currency," Danske Bank said in a report.
Czech parliament will vote on the 2011 budget next
Wednesday, with smooth approval expected for the plan to narrow
the fiscal gap to 4.6 percent of gross domestic product from 5.1
percent forecast for this year.
The Romanian opposition may also call a vote of no
confidence against the fragile centre-right government. The
opposition has repeatedly failed to dismiss the cabinet but it
has kept pressure on markets.
The leu was flat in early trade at 4.298 to the euro.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.063 25.07 +0.03% +5.01%
Polish zloty <EURPLN=> 4.03 4.032 +0.05% +1.84%
Hungarian forint <EURHUF=> 277.65 277.26 -0.14% -2.63%
Croatian kuna <EURHRK=> 7.386 7.386 0% -1.04%
Romanian leu <EURRON=> 4.299 4.298 -0.02% -1.43%
Serbian dinar <EURRSD=> 106.85 107.18 +0.31% -10.27%
*Benchmark is German bond equivalent.
All data taken from Reuters at 0944 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Jan Lopatka; Editing by Toby Chopra)
