* FX under pressure as Japan drives investors cut exposure
* Stocks lose ground, track peers
* Polish bond yields down on lower than fcast CPI
(Releads, updates prices)
By Jason Hovet and Radu Marinas
PRAGUE/BUCHAREST, March 15 (Reuters) - Central European
currencies slipped on Tuesday, under pressure after an overnight
drop as Japan's nuclear crisis drove sales of riskier assets and
lower Polish CPI raised doubt over an April rate hike.
Stock markets in emerging Europe fell by 0.7 to 2.8 percent
range, with Warsaw stocks <> down as much as 2 percent at
midday, led by copper miner KGHM <KGHM.WA> as commodity prices
dropped.
In Hungary, where local markets are closed on Tuesday, the
forint <EURHUF=> lost 0.6 percent from Monday's European close
to lead regional currency losses.
The zloty was 0.2 percent down, off a 3-1/2 month low hit
before the opening while the Czech crown <EURCZK=>, usually a
safe haven play within emerging Europe, fell 0.3 percent.
The Romanian leu <EURRON=> was flat.
"Fear of further damage at the Japanese nuclear plants is
causing investors to close their positions on emerging markets,"
said Robert Kesicki, a Warsaw-based FX dealer at Kredyt Bank.
Poland's inflation was lower than forecast in February,
pushing bond prices higher on the prospect the figures may help
persuade the central bank to keep rates steady in April.
Consumer price inflation <PLCPIY=ECI> stood at 3.6 percent
year-on-year in February, unchanged from January's revised 3.6,
statistics office data showed on Tuesday.
Analysts in a Reuters poll had expected prices to have risen
3.9 percent year-on-year. After the data release, Polish bond
yields fell 2-5 basis points across the curve.
"These numbers show that an April rate increase by the MPC
is not a foregone conclusion," said Grzegorz Ogonek, economist
at ING Bank.
ADDS TO PRESSURE
The market and economic uncertainty following the Japanese
earthquake has added to the pressure seen on central European
currencies in recent weeks as the outlook for monetary policy
tightening across the region blurs.
Speculation of knee-jerk hikes in emerging central Europe
rose earlier this month after European Central Bank President
Jean Claude Trichet signaled the bank could raise its cost of
borrowing in April.
But a look at rate developments over the last five years
shows domestic inflation, and not ECB moves, has been the main
policy driver in the developing countries east of the euro zone.
[] []
While Czech bond yields edged mostly lower on Tuesday,
expectations the bank would rush to begin monetary tightening
were undermined by news that Kamil Janacek, one of a minority
group on the central bank's board advocating a rate rise, would
miss the meeting this month. []
And on Tuesday, another board member Pavel Rezabek who had
been pointing to the need to higher rates since December, said
the timing of tightening was unclear due to the lack of demand
CPI pressures.[]
Forward rate agreements <CZK3X6F=> betting on the level of
three-month rates in three months time fell 3 basis points on
Tuesday.
With markets increasingly leaning away from the chance of a
rate hike at the March 24 meeting, analysts said the crown would
continue to weaken. On the technical front, analysts said, the
crown would look to test its 55-day moving average.
"The (EUR/CZK) pair may try to retest the 55-day moving
average at 24.40. If that is the case, the space up to the 24.71
level would be open," KBC said.
"It seems as if the Polish zloty could be heading above 4.00
against the euro more permanently on the back of a general
worsening of Polish fundamentals -- especially concerns over
Polish public finances," Danske Bank said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.386 24.319 -0.27% +2.52%
Polish zloty <EURPLN=> 4.043 4.037 -0.15% -2.1%
Hungarian forint <EURHUF=> 273.58 272.04 -0.56% +1.61%
Croatian kuna <EURHRK=> 7.382 7.386 +0.05% -0.03%
Romanian leu <EURRON=> 4.179 4.179 0% +1.29%
Serbian dinar <EURRSD=> 102.51 102.49 -0.02% +3.33%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +11 basis points to 19bps over bmk*
7-yr T-bond CZ7YT=RR +9 basis points to +74bps over bmk*
10-yr T-bond CZ9YT=RR +7 basis points to +77bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +8 basis points to +349bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +337bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +310bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1543 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Editing by Ruth Pitchford)
