(Updates with central bank decisions, changes dateline)
PRAGUE, Dec 22 (Reuters) - Hungary's forint dipped after the
central bank cut interest rates half a point on Monday and
signalled more to come, but it remained a net gainer as some
stability returned to central Europe in thin end of year trade.
By 1451 GMT, the forint <EURHUF=> gained 0.2 percent from
Friday's closing levels at 263.8 per euro, recouping earlier
losses after the central bank cut for the third time since late
November.
The Czech crown and Polish zloty also gained, recovering
after a torrid few weeks due to investors selling emerging
European assets due to cutbacks on risk exposure and
expectations of falls in regional interest rates and growth.
Hungary's main rate stands at 10 percent and it has now
eliminated half of an emergency 300 basis point hike in October
when the global financial crisis hammered the currency. The bank
said on Monday more downward moves could come if the country's
financial system continues to stabilise [].
"They cannot run faster than the global backdrop allows,"
said Martin Blum, head of emerging markets economics and forex
strategy at UniCredit in Vienna.
Central banks have mostly started easing policy, and a slew
of worsening data in the past month has darkened the outlook for
central Europe's export-reliant economies. On Tuesday, Poland is
also seen lowering its main rate 50 basis points [].
The Polish zloty <EURPLN=> was 0.2 percent up at 4.09 per
euro, but has lost almost 30 percent since July highs.
The Czech crown <EURCZK=> added 0.7 percent to 26.29 per
euro, while Romania's leu <EURRON=> bid up at 3.92 per euro
before a confidence vote later in the day for the new cabinet.
Central European bond yields were little moved.
Serbia, however, left its key rate at 17.75 percent on
Monday, resisting pressure to cut in support of its economy
after the dinar currency fell to record lows this month on
external financing worries [].
The dinar <EURRSD=> gained 0.8 percent to 85.13 per euro.
Central Europe's currencies have taken a beating in the last
half of 2008, showing double digit percentage falls since record
highs over the summer, after concerns over some countries'
exposure to foreign credit sent investors fleeing in the autumn.
Hungary and Serbia have since sought help from the
International Monetary Fund, and other east European governments
like Latvia and Ukraine have followed suit.
In Romania, which runs a vast current account deficit that
makes it vulnerable in the current climate according to
economists, designate Finance Minister Gheorghe Pogea pledged on
Saturday to cut state spending to calm currency markets and
safeguard the economy from financing risks. []
"The fact that pre-election populist rhetoric is not going
to be implemented should help calm investors nerves at the
moment," BNP Paribas analysts wrote on Monday.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 26.287 26.476 +0.71% +0.79%
Polish zloty <EURPLN=> 4.092 4.099 +0.17% -13.65%
Hungarian forint <EURHUF=> 263.82 264.3 +0.18% -4.34%
Croatian kuna <EURHRK=> 7.242 7.239 -0.04% +1.15%
Romanian leu <EURRON=> 3.918 3.925 +0.18% -9.44%
Serbian dinar <EURRSD=> 85.13 85.851 +0.84% -8.09%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +26 basis points to 176bps over bmk*
5-yr T-bond CZ5YT=RR +8 basis points to +154bps over bmk*
10-yr T-bond CZ9YT=RR +14 basis points to +127bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +355bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +308bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +260bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +10 basis points to +770bps over bmk*
5-yr T-bond HU5YT=RR +8 basis points to +713bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +546bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1550 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/Jason Hovet)
