(Changes dateline, new throughout)
BUDAPEST, Sept 24 (Reuters) - Central European currencies
and government bonds extended their losses on Wednesday as
political wrangling in the United States over a bailout package
for troubled banks kept appetite low for emerging market assets.
The Polish central bank left interest rates unchanged at its
policy meeting as expected and analysts still see another rate
rise in this cycle. But the decision and the central bank's
comments were unable to reverse the zloty's <EURPLN=> fall.
Concern over liquidity and risk appetite in global markets
remains a key factor for assets in the region, while investors
are also watching how central banks react to worsening economic
growth and improving inflation prospects, dealers said.
Polish bonds weakened slightly across the curve after the
central bank decision.
"The statement and news conference did not bring any new
angle. Therefore we must closely watch upcoming data and
inflation projection," said a dealer at PKO BP Marek Kaczor.
The Czech crown <EURCZK=> led the losses before the Czech
central bank policy meeting on Thursday, retreating to well
beyond the key 24.00 per euro level.
Last month, the bank became the first in the region to ease
monetary policy after a series of rate hikes and it is expected
to leave rates unchanged at the upcoming meeting. However,
analysts believe further Czech rate cuts are in the pipeline.
The crown had jumped to a record 22.925 to the euro in July
-- up nearly 19 percent from a year earlier -- before central
bankers spoke out against the currency's strength and followed
up their rhetoric with a rate cut on Aug. 7.
The crown has fallen as low as 25 per euro since, but
rebounded in recent weeks on the back of a strengthening zloty.
Analysts see a level firmer than 24 as too strong for the
central bank's tastes.
"It has flirted with the 24 level for quite a while now,"
said Ulrich Leuchtmann, head of foreign exchange research at
Commerzbank in Frankfurt. "But the market appetite to test the
central bank again is very limited at the moment."
Hungary's forint and government bonds tracked the weakening
zloty and the crown in illiquid trade.
"There is no liquidity, (dealers) try to cover the
commercial flows what they have so as to go home with flat
books," one Budapest-based currency dealer said.
"All this is driven by world markets, the Dow (.DJI) is
lower by 30 points now but if it returns into the black, the
forint will also firm," the dealer said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.335 24.046 -1.20% +8.16%
Polish zloty <EURPLN=> 3.326 3.296 -0.91% +7.62%
Hungarian forint <EURHUF=> 241.100 240.59 -0.21% +4.65%
Croatian kuna <EURHRK=> 7.107 7.119 +0.17% +3.00%
Romanian leu <EURRON=> 3.675 3.662 -0.35% -2.65%
Serbian dinar <EURRSD=> 76.384 76.248 -0.18% +3.02%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +1 basis points to 16bps over bmk*
5-yr T-bond CZ5YT=RR +2 basis points to +3bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +32bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +12 basis points to +252bps over bmk*
5-yr T-bond PL5YT=RR +10 basis points to +202bps over bmk*
10-yr T-bond PL10YT=RR +8 basis points to +164bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +19 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR +14 basis points to +493bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +376bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1646 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters buros, writing by Sandor Peto)
