BUDAPEST, Jan 4 (Reuters) - East European currencies kicked
off the year stronger on the back of a weaker dollar but a clear
direction will only form in the next few days as markets weigh
political and budget issues, dealers and analysts said.
"We are stronger than we have been for quite a while," a
dealer in Budapest said. "We will need a couple of days to see
what the mood is like on emerging markets."
The Polish zloty <EURPLN=> added 0.4 percent by 0823 GMT on
Monday, followed by the Hungarian forint <EURHUF=> and the
Romanian leu <EURRON=>, each 0.3 percent stronger. The Czech
crown <EURCZK=> added 0.1 percent.
Dealers expect the crown, the top performer of the region in
2009, to face continued pressure, with some investors starting
to favour long zloty versus crown trades due to lower Czech
interest rates.
Separately, Prime Minister Jan Fischer announced on Sunday
the central state budget deficit likely reached 195 billion
crowns ($10.6 billion) in 2009, around five times an original
target. []
The budget news comes against a background of sounder
fundamentals than regional peers, Cheuvreux said in a note.
"This basically sets off the start to the 2010 season of
fiscal issues, which all EU members will have to address,"
Cheuvreux said. "The Czech Republic, with a debt/GDP ratio of 30
percent at end-08... (is) much better placed than others."
Aside from the PLN/CZK carry trade, the zloty also benefits
from strong fundamentals, as investors increasingly bet the
Polish unit could outperform regional neighbours this year.
"The zloty's further strengthening should be supported in
coming weeks by local fundamentals, especially a likely strong
industrial output reading," analysts at BRE bank in Warsaw wrote
in a note.
Poland posted a region-best manufacturing sentiment index on
Monday, stable at 52.4 points in December after a similar
reading in November. []
The Czech PMI reading improved to 50.9 [] and
Hungary's index also ticked up, to 48.5 [].
In Romania, markets are gearing up for a central bank rate
decision on Tuesday. Analysts polled by Reuters last month said
the bank would keep rates at 8 percent, until parliament passes
an austere 2010 budget needed to unlock international aid.
"The central bank's decision is hard," a dealer said in
Bucharest. "Interbank interest rates are high, there will be
price hikes, so there is pressure on inflation. On the other
hand, lending must resume which means lower rates."
Dealers have said the leu could firm once the budget is
approved, a key condition for the International Monetary Fund to
free up funds from Romania's 20 billion euro aid package as
early as February. Parliament begins budget talks on Jan. 11.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.321 26.334 +0.05% -0.01%
Polish zloty <EURPLN=> 4.088 4.104 +0.39% +0.39%
Hungarian forint <EURHUF=> 269.43 270.19 +0.28% +0.34%
Croatian kuna <EURHRK=> 7.291 7.31 +0.26% +0.25%
Romanian leu <EURRON=> 4.219 4.233 +0.33% +0.44%
Serbian dinar <EURRSD=> 96.45 95.88 -0.59% -0.59%
All data taken from Reuters at 0923 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Reuters bureaux, Writing by Marton Dunai; Editing
by Andy Bruce)
