* Forint almost flat, off lows, bonds mixed
* Zloty weaker, rate outlook weighs on unit
* ECB in focus
* Croatian kuna rises before auctions
(Adds Hungary budget, Croatia kuna)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, March 7 (Reuters) - Hungary's forint was a
touch stronger against the euro on Monday after the government
nominated two new central bankers, while the Czech crown drew
support from speculation about an eventual rate hike.
Hungary's ruling Fidesz party put two economists on the
central bank's seven-member Monetary Policy Council, but kept
two other open spots vacant for now -- leaving some market
uncertainty over future policy moves. []
Analysts expect government nominations to give the council a
looser policy bias, at least forestalling further rises in
interest rates, and expectations of flat or looser monetary
policy has dragged on the forint. []
A mid-February Reuters poll showed most analysts expect flat
rates until the end of the year. <HUREPO1>
The two nominees balanced comments stressing the importance
of fighting inflation on Monday with a commitment to support
government policies as long as that did not threaten the bank's
main inflation-fighting objective. []
"We do not think rates will be cut immediately, but instead
towards the end of the second quarter by which time the other
two members may have been appointed," Peter Attard Montalto, an
economist at Nomura, wrote in a note.
"Overall, we expect the market to simply focus on the fact
that these new members are saying the right thing and so their
appointment will probably be slightly market positive."
By 1629 GMT, the forint <EURHUF=> rose less than 0.1 percent
on the day to 271.4 per euro.
The market was little moved late in the day by end-February
budget data showing the accumulated deficit was 81.4 percent of
the full-year goal. []
The government expects proceeds from the sale of private
pension assets and crisis taxes to flow into the budget in the
second half of the year.
Hungary's bonds were mixed, with the short end of the curve
weakening slightly as some market traders said the two nominees
could not be as dovish as previously expected.
"The expectations had been that the government will pack the
central bank with dovish rate setters," one Budapest-based
trader said.
"I don't think that we could call these two nominees dovish,
they will not rush to cut interest rates. Interest rates rise in
the world, and if they (the new rate setters) see an inflation
shock, they will also increase interest rates."
RATE OUTLOOK UNCERTAIN
Emerging European currencies have given back some or all of
the gains seen at the start of this year and players said there
was no clear direction at the moment, with questions remaining
over monetary policy, especially after the ECB signalled it may
raise rates as soon as next month.
The zloty has retreated since the central bank left interest
rates on hold last week after beginning a tightening cycle in
January. Only half the market had expected a rate rise, while
others had expected it to wait until next month.
Comments from two Polish central bankers showed on Monday
that divisions persist over the timing of another interest rate
rise after the bank's governor used his casting vote to break
the deadlock at sittings late last year. []
The crown, seen as a safe haven in the region, gained in a
technical rebound and also from speculation that the Czech
central bank may begin tightening policy sooner than expected,
some dealers said.
Markets have priced in a first hike in June and
shorter-dated forward rate agreements have risen to a year-high
in the past week.
"Although Middle East turmoil may weigh on regional
currencies, the technical picture looks rather supportive for
the crown after the EUR/CZK pair failed to break above the
55-day moving average," KBC said.
Late in the day the zloty <EURPLN=> was 0.05 percent lower
against the euro, while the Czech crown <EURCZK=> and Romania's
leu <EURRON=> gained 0.4 percent and 0.2 percent.
The Croatian kuna <EURHRK=> rose 0.2 percent before a
Tuesday auction of treasury bills. The market is also
anticipating the state will tap foreign markets soon, which
normally adds appreciation pressure.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.172 24.259 +0.36% +3.43%
Polish zloty <EURPLN=> 3.971 3.973 +0.05% -0.33%
Hungarian forint <EURHUF=> 271.4 271.6 +0.07% +2.42%
Croatian kuna <EURHRK=> 7.405 7.42 +0.2% -0.34%
Romanian leu <EURRON=> 4.194 4.202 +0.19% +0.93%
Serbian dinar <EURRSD=> 103.3 103.37 +0.07% +2.54%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to 11bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +71bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +79bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +336bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +323bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +297bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +498bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +464bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +420bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1731 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/Ruth Pitchford)
