* FX hold Monday's gains after Hungary's small rate cut
* Polish rates seen flat, Romania govt seen getting approval
By Marius Zaharia
BUCHAREST, Dec 22 (Reuters) - Central European currencies
were stable early on Tuesday, holding the previous session's
gains triggered by a smaller than expected rate cut in Hungary.
With trading subdued by the holiday season, markets were
eyeing Wednesday's rate decision in Poland and a government
confidence vote in Romania.
Dealers expected currencies to move in tight correlation
with core markets, although low liquidity may exacerbate moves.
At 0818 GMT, the Czech crown <EURCZK=> and the Polish zloty
<EURPLN=> were up 0.2-0.3 percent on the day, the Hungarian
forint <EURHUF=> was flat and the Romanian leu <EURRON=> was 0.2
percent weaker.
"The region has some support from Hungary's smaller rate
cut, but trading is thin and dollar strength is limiting gains,"
one dealer in Bucharest said.
The forint gained more than one percent on Monday, following
central bank's surprise 25 basis points cut to 6.25 percent,
after four successive half percentage point cuts in the past
four months and a 100 basis points cut in July [].
The move signalled caution after a recent weakening of the
forint and uncertainties about the 2010 budget outlook,
particularly in view of elections in April or May next year.
Elsewhere, Poland is widely expected to leave interest rates
unchanged at its last interest rate decision of the year on Dec.
22 and 23, with analysts predicting stable borrowing costs well
into 2010. []
Monetary easing is expected to have come to an end in the
Czech Republic as well, after the central bank surprisingly
cut rates to a new record low of 1 percent last week.
[]
Markets are also eyeing a Romanian confidence vote on
Wednesday on a centrist cabinet unveiled by Prime Minister
designate Emil Boc on Sunday [], hopeful it will
show a months-long political deadlock is nearing an end.
Approval looks all but guaranteed since Boc's coalition has
five votes more than the 236-seat majority needed.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.2 26.244 +0.17% +2.11%
Polish zloty <EURPLN=> 4.185 4.197 +0.29% -1.67%
Hungarian forint <EURHUF=> 274.4 274.34 -0.02% -3.95%
Croatian kuna <EURHRK=> 7.285 7.285 0% +1.1%
Romanian leu <EURRON=> 4.224 4.215 -0.21% -4.96%
Serbian dinar <EURRSD=> 95.97 96.09 +0.13% -6.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 75bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +86bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +77bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +349bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +292bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +649bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +591bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +500bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1018 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, Writing by Marius Zaharia,
Editing by Ruth Pitchford)
