WARSAW, Aug 3 (Reuters) - Central European currencies' rally
paused on Tuesday, with markets looking to signals on Romania's
IMF deal and interest rates later this week for fresh direction
after a drive higher based mainly on global moves.
Most traders remained bullish on the outlook for the region
and the Czech crown was still trading close to 20-month highs
and the Polish zloty near 11-week-highs.
But European stocks drifted lower in early trade, signalling
a halt in a rally on the back of stronger company results and
improved economic data.
"Investors' eyes are still directed on stocks," said one
Warsaw-based dealer. "Risk appetite returned and as long as
stocks are strong, currencies will be on the stronger side as
well."
By 0730 GMT the crown <EURCZK=> and Poland's zloty <EURPLN=>
were slightly lower at 24.67 and 3.983 to the euro respectively.
Hungary's forint <EURHUF=> forint fell 0.3 percent.
Stocks in the region opened mixed, with Budapest's BUX
<> rising almost 1 percent and Warsaw WIG20 <>
slightly down after it had risen almost 3 percent on Monday.
Romania's leu <EURRON=> was also slightly lower, traded at
4.246 to the euro.
The International Monetary Fund's review of Romania's 20
billion euros aid deal is expected to end on Wednesday and
dealers said the market has already priced in the likely
disbursment of a 900 million euros tranche.
Its central bank also decides on interest rates on
Wednesday.
The Czech central bank is expected to keep rates on hold on
Thursday with dealers saying the crown <EURCZK=> may ease
further to around 25 per euro, where policymakers have verbally
intervened before to protect exports.
In Poland, one of the central bank's Monetary Policy Council
(MPC) members said a government plan to raise VAT would boost
inflation, but not necessarily lead to a rise in interest
rates.[]
The VAT hike is part of a plan to cut the general government
deficit to the European Union's limit of 3 percent of gross
domestic product (GDP) in 2013 -- a year later than earlier
promised -- and keep public debt below 55 percent of GDP.
The Polish central bank has kept its benchmark rate at an
all time low of 3.5 percent since June 2009 and markets expect
the 10-strong policy council to raise borrowing costs by 25
basis points later in the year in response to an anticipated
pick-up in inflation in the medium term.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24,67 24,645 -0,1% +6,68%
Polish zloty <EURPLN=> 3,983 3,98 -0,08% +3,04%
Hungarian forint <EURHUF=> 281,84 281,04 -0,28% -4,08%
Croatian kuna <EURHRK=> 7,22 7,229 +0,12% +1,24%
Romanian leu <EURRON=> 4,246 4,241 -0,12% -0,2%
Serbian dinar <EURRSD=> 106,46 106,73 +0,25% -9,94%
*Benchmark is German bond equivalent.
All data taken from Reuters at 0930 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 Patrick Graham)
