* Leu slightly off 7-month lows after no-confidence vote
* Zloty edges up but pressured by political uncertainty
(Recasts with Romanian govt vote)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Oct 13 (Reuters) - The Romanian leu trimmed
losses after parliament voted to topple the government, but it
stuck near seven-month lows and the price of insuring the
country's debt rose on concerns over the country's IMF package.
Dealers said investors booked profits after the widely
expected downing of the cabinet. Markets were also looking for
signs whether the central bank would prop up the leu, they said,
although there was no indication intervention was taking place.
By 1324 GMT, the leu <EURRON=> was bid at 4.292 to the euro,
down 0.5 percent from the previous day's close.
"Investors are booking profits. Large changes are expected
after the presidential election anyway so the cabinet fall is
not that negative," a Bucharest dealer said.
"At any rate, I am convinced that the central bank is
constantly monitoring the market and if the leu weakens past a
certain level it will intervene... Some say the level is 4.3,
others 4.35, but it is hard to say."
Currency dealers in recent weeks have said that the bank has
been stepping into the market to defend the leu. The bank has
declined to comment.
Romanian deputies voted 258 to 176 on Tuesday to end
outgoing Prime Minister Emil Boc's cabinet after his coalition
split earlier this month. []
Analysts say political deadlock may harm fiscal and budget
cuts needed to ensure the International Monetary Fund continues
to disburse aid from its 20 billion euro anti-crisis package.
"Most important is what this means for the future of the IMF
programme, in the context of Romania's previous failed IMF
programmes," said Neil Shearing, emerging Europe economist at
Capital Economics.
He said a key question is what government can appear out of
this, and if it will be strong enough, but if not it could hurt
the budget, hitting the leu and limiting room for needed
interest rate cuts to stimulate the battered economy.
Romanian 5-year CDSs, which reflect the price of insuring a
country's debt, rose to 229.2 basis points, versus 218 earlier
in the day.
IN OTHER MARKETS
In Poland, the zloty <EURPLN=> was off early highs; dealers
said continued political uncertainty was weighing after Prime
Minister Donald Tusk ditched three ministers and sacked the head
of an anti-graft body last week 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.
"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.
Elsewhere, the Hungarian forint was down 0.41 percent, and
the Czech crown <EURCZK=> dropped back an identical amount to
25.904 per euro. It had benefited from tempered rate cut
expectations after August industrial output data rose on Monday.
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.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.904 25.797 -0.41% +3.28%
Polish zloty <EURPLN=> 4.227 4.225 -0.05% -2.65%
Hungarian forint <EURHUF=> 269.03 267.92 -0.41% -2.04%
Croatian kuna <EURHRK=> 7.254 7.25 -0.06% +1.53%
Romanian leu <EURRON=> 4.292 4.272 -0.47% -6.47%
Serbian dinar <EURRSD=> 92.92 92.93 +0.01% -3.7%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -16 basis points to 128bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +157bps over bmk*
10-yr T-bond CZ10YT=RR -9 basis points to +139bps over bmk*
All data taken from Reuters at 1526 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)
