* GDP improves, but fiscal risks remain
* Czech, Polish 5-year bond auctions see solid demand
* Polish PZU IPO supports zloty, dealers say
(Updates throughout)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, May 12 (Reuters) - Stronger GDP readings in
central Europe's export-driven economies gave their currencies a
lift on Wednesday but market concerns about fallout from the
euro zone's debt crisis persisted.
First quarter gross domestic product data showed Hungary
moved firmly out of recession and the Czech Republic's
industry-led recovery continued, helping the forint and crown
erase overnight losses.
The leu lagged slightly after data showed Romania's economy
shrank -- though not as sharply as expected -- in the first
quarter, leaving leeway for further rate cuts.
Markets took the data as a good sign, although analysts said
revisions were still possible and fiscal tightening this year
would act as a drag on any recovery.
"Sentiment in the region is better, but rain clouds are
still here," said one Warsaw-based dealer.
The Czech crown <EURCZK=>, which has benefited from regional
cross-trades this week, rose a touch to bid flat on the day at
25.408 by 1346 GMT. Hungary's forint <EURHUF=> inched up 0.3
percent and the leu <EURRON=> was steady.
"Hungary's (GDP) figure came in above expectations, thus the
whole region is supported," said Ulrich Leuchtmann, analyst at
Commerzbank in Frankfurt. "Nevertheless the euro story is still
the key for the region."
The Poles and Czechs sold 5-year bonds at tenders. Demand
was solid at both auctions and market watchers said the results
were a sign that recent market jitters had eased.
[] []
LACK OF CLARITY
Poland's zloty <EURPLN=> rose 1.1 percent and was
Wednesday's top regional performer, with dealers citing modest
support from a successful market debut for Poland's top insurer
PZU <PZU.WA> after Europe's largest IPO in two years.
Earlier, the Finance Ministry said it had not been active
recently on the currency market. The statement followed market
talk that the ministry had been selling large amounts of euros.
[]
Analysts expect central European currencies to gain this
year, boosted by rising exports to western markets, but also
warn any slowdown in the euro zone will be felt in the region.
The euro was firmer but remained under selling pressure on
Wednesday, with investors still sceptical about whether euro
zone economies can deliver the drastic spending cuts and tax
increases needed to get their fiscal houses in order.
Markets rose at their fastest pace this year on Monday after
the announcement of a $1 trillion rescue package to contain the
Greek debt crisis, but returning uncertainty caused a drop in
volumes on Tuesday and led to a regional correction.
CEE stock markets were also in the black on Wednesday, with
Bucharest's BETI <>BET> leading gains, rising some 2.2 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.392 25.412 +0.08% +3.65%
Polish zloty <EURPLN=> 3.967 4.01 +1.08% +3.45%
Hungarian forint <EURHUF=> 273.6 274.52 +0.34% -1.19%
Croatian kuna <EURHRK=> 7.25 7.261 +0.15% +0.82%
Romanian leu <EURRON=> 4.174 4.175 +0.02% +1.52%
Serbian dinar <EURRSD=> 99.83 99.49 -0.34% -3.96%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +8 basis points to 105bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +99bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +91bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +340bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +267bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -23 basis points to +524bps over bmk*
5-yr T-bond HU5YT=RR -10 basis points to +470bps over bmk*
10-yr T-bond HU10YT=RR -8 basis points to +386bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1546 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Dagmara Leszkowicz; editing by Ian Jones, John Stonestreet)
