* Leu stable ahead of crucial vote on new govt
* Crown gains, investors reverse bets on Thurs cbank
* Poland mulls withholding money from pension funds
(Recasts with crown)
By Gergely Szakacs and Jason Hovet
BUDAPEST/PRAGUE, Nov 4 (Reuters) - The Czech crown rose on
Wednesday on the back of reduced bets for an interest rate cut
this week, while Romania's leu was steady before a parliamentary
vote expected to reject the proposed new government.
Central Europe's currencies have given back recent gains in
the past few weeks as investors question a half-year rally for a
region still bogged down by rising budget shortfall, chances for
monetary easing and political uncertainty.
The correction has been led by the Hungarian forint and
Polish zloty, which rose moderately on Wednesday.
The forint was given a boost after Hungary's caretaker
government survived a key vote on Tuesday that approved the
cornerstone figures of the 2010 budget. []
By 1219 GMT, the forint <EURHUF=> inched up 0.3 percent from
Tuesday's European close, bid at 276.7 to the euro after
weakening briefly this week to its lowest since June.
The leu <EURRON=> was flat, with range trading before the
vote for the proposed cabinet of Prime Minister designate Lucian
Croitoru that has been little chance of passing. []
"The market has already priced in a negative vote," said one
dealer with a foreign bank in Bucharest.
The leu got some support from the central bank unexpectedly
keeping its main interest rate unchanged at 8 percent on
Tuesday, citing risks stemming from the government crisis that
has threatened Romania's IMF aid deal. []
TO CUT OR NOT
Strategists have said the recent pullback in markets would
be brief and was not a reversal of the rally that has boosted
the forint, zloty and crown around 8 percent since March.
A Reuters poll on Tuesday showed the region's currencies
would return to firming by 2010 and post solid gains in the next
12 months, led by the zloty. []
The Czech crown has been the most solid performer this year
and is the only major CEE currency to gain year-to-date, gaining
0.7 percent on Wednesday to 26.058 per euro.
However, the unit had fallen back as much as 4.5 percent in
the past month on expectations the central bank may still cut
interest rates from a record low of 1.25 percent. []
Analysts, though, expect rates to stay put after recent
currency weakness and an improving economic outlook. On
Wednesday investors cut short crown positions in anticipation of
interest rates on hold at Thursday's policy meeting.
"The market is starting to realise a rate cut is far from
sure," said David Sykora, a dealer with CSOB.
But bonds and rate markets were steady, with fixed income
dealers saying forward rate agreements were pricing in a 50
percent probability for lower main rates.
In Poland, the zloty <EURPLN=> gained 0.6 percent, and bonds
strengthened marginally as markets were trying to figure out the
potential impact of planned changes to the pension system, said
Pawel Bialczynski, dealer at BRE Bank.
Poland wants to reduce the amount of money it transfers to
private pension funds to help keep down government borrowing,
local papers quoted the finance minister as saying on Wednesday.
Starting in 2010, Poland may cut such contributions in half,
which would save the state 13 billion zlotys ($4.4 billion) at
the expense of private funds, which are major players on the
Polish market. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.058 26.235 +0.68% +2.67%
Polish zloty <EURPLN=> 4.264 4.29 +0.61% -3.49%
Hungarian forint <EURHUF=> 276.7 277.65 +0.34% -4.75%
Croatian kuna <EURHRK=> 7.255 7.252 -0.04% +1.52%
Romanian leu <EURRON=> 4.299 4.296 -0.07% -6.62%
Serbian dinar <EURRSD=> 93.99 94.2 +0.22% -4.8%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to 92bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +98bps over bmk*
10-yr T-bond CZ10YT=RR -16 basis points to +91bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +358bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +319bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +281bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +492bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +427bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1321 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Gergely Szakacs and
Jason Hovet; editing by Chris Pizzey)
