* FX weaker, markets await Wednesday rate decisions
* Euro zone, Irish bank woes weigh on units
* Fiscal policy key in Hungary, Poland
(Adds fixed income, background on fiscal worries)
By Dagmara Leszkowicz
WARSAW, Sept 28 (Reuters) - Central European currencies
eased on Tuesday as investors took a wait-and-see approach ahead
of Polish and Romanian interest rate decisions scheduled for
Wednesday.
With no major macroeconomic data expected from the region on
Tuesday, dealers said external factors such as concerns over
Ireland's banking system and the heavily indebted euro zone
periphery might weigh on riskier assets in the short term.
In Poland, the central bank's Monetary Policy Council (MPC)
started a two-day meeting on Tuesday and the vast majority of
analysts expect rates to remain flat for the 15th consecutive
month.
"The key event will be the MPC's rate decision. A possible
rate hike would cause a dynamic zloty strengthening," analysts
at BRE bank in Warsaw said.
In Romania, all analysts polled by Reuters see its central
bank also keeping rates flat, at 6.25 percent. It has little
scope to move against surging inflation, given worries over
Bucharest's finances and an economic recovery that is lagging
its peers.
Poland's three-month wibor <WIBOR=> prices in one hike from
the current record low of 3.5 percent by the end of 2010.
By 0912 GMT the zloty <EURPLN=> was down 0.6 percent against
the euro, while Hungary's forint <EURHUF=> fell 0.3 percent and
Romania's leu <EURRON=> dropped 0.4 percent against the common
currency.
The Czech crown <EURCZK=> fell 0.1 percent in thin trade as
the country's market was closed for a public holiday.
The region's stock indices were also in negative territory,
with Warsaw's WIG20 <> leading losses, down 1.1 percent.
FISCAL POLICY KEY
The rate decisions in Poland and Romania follow the
Hungarian National Bank's decision to leave its borrowing costs
flat at a record low of 5.25 percent on Monday.
The bank warned it might raise rates if investors' attitude
to the country worsens but said fiscal policy for the next year
would be key. []
The Fidesz government, under pressure from the European
Union, has pledged to cut next year's budget deficit below 3
percent of GDP. Details of the 2011 budget are likely to be
published only after municipal elections on Oct. 3.
Fiscal policy is also in the limelight in Poland, where the
finance ministry said on Monday the budget deficit was set to
exceed previous estimates in both 2010 and 2011, according to
the final draft of the 2011 budget. []
The 2010 general government budget deficit will be 6.3
percent of gross domestic product (GDP) this year and 5.0
percent in 2011 according to the Polish accounting methodology,
the draft showed.
The draft, due to be finally approved by the government on
Tuesday, did not give the more widely defined EU-standard ESA-95
deficit measure, but the figures appeared to point to bigger
deficits than the government has previously forecast.
The centre-right government has said it will bring the
ESA-95 deficit down to the European Union's 3 percent ceiling by
2013, though many economists doubt whether this is possible even
with accelerating economic growth.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.602 24.578 -0.1% +6.98%
Polish zloty <EURPLN=> 3.977 3.952 -0.63% +3.19%
Hungarian forint <EURHUF=> 277.89 277.14 -0.27% -2.71%
Croatian kuna <EURHRK=> 7.291 7.29 -0.01% +0.25%
Romanian leu <EURRON=> 4.265 4.248 -0.4% -0.65%
Serbian dinar <EURRSD=> 105.91 105.69 -0.21% -9.47%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +105bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +117bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +401bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +367bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +324bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +564bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +524bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +458bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1112 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, editing by Tim Pearce)
