* Leu nears 7-month low before Romanian no-confidence vote
* Zloty edges up but pressured by political uncertainty
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Oct 13 (Reuters) - Romania's leu fell to nearly
7-month lows on Tuesday as fears over political instability
raised concerns about the country's International Monetary Fund
aid package.
Romania's parliament is debating a no-confidence vote
against the minority government called by leftists and centrists
after Prime Minister Emil Boc's coalition cabinet split earlier
this month, plunging the country into political crisis.
[]
Analysts say political deadlock may harm fiscal and budget
cuts needed to ensure the IMF continues to disburse aid from its
20 billion euro anti-crisis package.
"Political noise seems to be the magic ingredient," said a
dealer with a foreign bank in Bucharest.
"If the government falls, which isn't yet clear, foreigners
could find that a reason to sell the leu."
At 0836 GMT the leu <EURRON=> was 0.2 percent weaker to the
euro, trading at 4.283.
By contrast, the Polish zloty <EURPLN=> and bonds
strengthened around 0.2 percent, though dealers said continued
political uncertainty was weighing on the zloty.
"If we're not surprised today by other ministers'
dismissals, the zloty should appreciate gradually," analysts at
BRE bank in Warsaw wrote in a note.
Last week, Polish Prime Minister Donald Tusk ditched three
ministers and sacked the head of an anti-graft body in an effort
to draw a line under a lobbying scandal that has harmed his
centre-right government's image. []
Over the weekend, Polish media said the anti-graft body had
also sent a document to the Prime Minister's office suggesting
there might have been irregularities in the government's recent,
unsuccessful attempt to sell two Polish shipyards.
Poland's central bank deputy governor Witold Kozinski said
the zloty would probably lack a clearer trend over the next
month.
Kozinski said he saw the zloty equilibrium rate at slightly
above 4.0 against the single currency, adding this could be a
good exchange rate for adopting the euro. []
TO CUT OR NOT TO CUT
Elsewhere, the Czech crown <EURCZK=> was slightly weaker. It
had benefited from tempered rate cut expectations after August
industrial output rose, while the current account gap was
smaller than expected.
A Reuters poll showed on Monday that analysts expect the
Czech central bank has already ended its easing cycle despite
weak price data and strong comments by some of its leading board
members suggesting the debate on rate cuts is not over yet.
[]
In Hungary, the statistics office said September inflation
surprisingly eased to 4.9 percent year-on-year, well below
analysts' expectations for a 5.3 percent annual rise, cementing
expectations for further interest rate cuts. []
"As for monetary policy, the September figures will do
nothing to change the course (of policy). More (rate) cuts are
in the pipeline," said Zsold Konrad analyst at MKB. "We expect a
50 basis point cut in October."
Hungary's central bank said last month it expected inflation
to fall below its 3 percent medium-term target next year and
some rate setters warned that the risk of undershooting the
target has increased as recession sharply cuts domestic demand.
Rate cut expectations also kept Hungary's bonds at
relatively strong levels with dealers saying the market yields
have been moving in a 20-30 basis point range recently.
The Czech crown <EURCZK=> was 0.2 percent down, while
Hungary's forint <EURHUF=> was 0.2 percent up to the euro.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.839 25.797 -0.16% +3.54%
Polish zloty <EURPLN=> 4.217 4.225 +0.19% -2.42%
Hungarian forint <EURHUF=> 268.5 267.92 -0.22% -1.84%
Croatian kuna <EURHRK=> 7.25 7.25 0% +1.59%
Romanian leu <EURRON=> 4.283 4.272 -0.26% -6.27%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -4 basis points to 140bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +155bps over bmk*
10-yr T-bond CZ10YT=RR +6 basis points to +154bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +378bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +333bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +304bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +528bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +487bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +442bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0936 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 Victoria Main)
