* Gains in dollar triggers retreat from early gains
* Romania cbank cuts interest rates as expected
* Serb dinar buoyed by cbank intervention -traders
(Updates prices, adds Serb central bank)
By Jason Hovet and Gergely Szakacs
PRAGUE/BUDAPEST, Feb 3 (Reuters) - Central European
currencies fell late on Wednesday as worries over debt in some
euro zone economies spread, cutting appetite for risk, and
overshadowing an improved outlook for the region's biggest
economy, Poland.
By 1547 GMT, Poland's zloty <EURPLN=> led losses with a 0.6
percent fall, while the Czech crown <EURCZK=> and the Hungarian
forint both fell 0.4 percent.
Romania's leu <EURRON=> was also around 0.4 percent weaker
after its central bank, as expected, cut interest rates to 7
percent, weakening the return on assets in one of the economies
hardest hit by the financial crisis. []
Dealers in Poland said the losses were due to gains in the
dollar, generally a sign of increased risk aversion amid concern
that euro zone member Greece's debt woes were spreading to
Portugal and Spain.
"The zloty eased more but it's no wonder as it was the top
gainer recently, while the forint is stuck around 270.5 (per
euro), there is no massive impetus in either direction," a
Budapest-based currency dealer said.
Central European currencies have been gaining this week on
hopes of a stronger economic recovery that makes them look like
better bets than many euro zone states, although there have been
worries the market might be heading for a correction.
The zloty is tapped by strategists as an outperformer this
year and has led gains since the start of the year with a 3.5
percent rise, breaking the psychological 4.0 per euro level this
week to reach a 13-month high.
Polish TVN CNBC reported the country's convergence plan for
joining the euro, due to be approved on Wednesday, sees the
economy growing 3.4 percent this year -- much higher than
previous estimates. []
ROMANIA CUTS RATES
The leu has kept pace with zloty gains this year after a new
government put together an austere 2010 budget that freed a
chunk of the country's delayed IMF aid and opened room for
further payouts. []
"With the IMF/EU programme back on track, and the leu
strengthening, we think that rates could fall to 6 percent by the
middle of this year," Capital Economics said in a note.
"However, much still rests on global risk appetite, and in
any case, lower interest rates will do little to revive
Romania's ailing economy in the near-term."
The Serbian dinar meanwhile was shored up by another central
bank intervention, dealers said.
Dealers said the Serb central bank had intervened directly
in the interbank market, selling euros to banks in a 98.60-98.80
dinar/euro range. []
That was the eleventh intervention since early December when
the dinar started falling, but the first direct one in a year.
The Czech central bank is expected to hold interest rates at
a record low of 1 percent on Thursday. Markets will mainly watch
for clues as to when policymakers will begin to tighten policy.
Bonds were mixed on Wednesday, also taking in stride Finance
Minister Eduard Janota's comments late on Tuesday that 1-2
billion euros worth of foreign-currency bonds would be issued in
2010, below the ministry's own ceiling. []
The news implied higher domestic borrowing as the Czechs
face record high borrowing this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.071 25.969 -0.39% +0.95%
Polish zloty <EURPLN=> 4.004 3.981 -0.57% +2.5%
Hungarian forint <EURHUF=> 271.33 270.23 -0.41% -0.36%
Croatian kuna <EURHRK=> 7.314 7.314 0% -0.07%
Romanian leu <EURRON=> 4.101 4.083 -0.44% +3.33%
Serbian dinar <EURRSD=> 98.8 98.51 -0.29% -2.96%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +2 basis points to 91bps over bmk*
7-yr T-bond CZ7YT=RR -9 basis points to +136bps over bmk*
10-yr T-bond CZ10YT=RR +4 basis points to +132bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +379bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +323bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +287bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +490bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +438bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1647 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Patrick Graham)
