* Currencies firm on better global sentiment
* Investors eye Hungary's c.bank rate decision at 1300 GMT
* Region's monetary easing trend seen paused
(adds background, quotes, fixed income)
By Marius Zaharia
BUCHAREST, Feb 23 (Reuters) - Central European currencies
firmed early on Monday on the back of a rally in stocks, with
investors eyeing a Hungarian central bank meeting that is
expected to mark a pause in the region's policy easing.
Hungary is seen keeping rates on hold at 9.5 percent
[], after delivering four 50 basis point cuts since
November, which have erased most of an October 300 basis point
emergency hike carried out to defend the forint.
Currencies were on a rollercoaster ride last week as
pressure mounted on concerns over sinking economies and exposure
to foreign debt.
Officials had to step in and talk up the currencies from
record lows. Poland converted EU funds to prop up the zloty,
while Hungary's prime minister asked the central bank last week
to explore "unconventional" means to stem forint losses.
"We've been guessing all week what he could have meant and
maybe today's news conference (by central bank governor Andras
Simor) will shed some light on that," a Budapest dealer said.
By 0912 GMT, the forint <EURHUF=> and the Polish zloty
<EURPLN=> were up 1 percent, the Czech crown <EURCZK=> had added
0.7 percent, while Romania's leu <EURRON=> traded flat.
Currencies gained on Monday from better global sentiment as
global stocks rose and the dollar fell after a media report said
the U.S. government could raise its stake in Citigroup to as
much as 40 percent. []
In Poland, investors were also looking ahead to a central
bank meeting this week.
"We expect that the decision of the Hungarian central bank
to leave rates unchanged will increase expectations that the
Polish central bank may do the same (on Wednesday), which should
additionally support the zloty," BPH said in a note to clients.
The zloty has also been hurt by losses at companies which
bet the wrong way when the currency was at record highs in the
summer. Poland has lost about 1 billion zlotys in bets taken by
state-controlled companies. []
Prime Minister Donald Tusk said on Friday the worst is past
for the zloty and the government had achieved its goal of
stabilising the currency [], but analysts disagreed
as weakening pressure on region's assets remains.
"We do not share his view," Commerzbank said in a note.
"MPC's stance remains crucial ... The zloty heavily suffers from
an expansionary monetary policy, (and its) slide will only end
when this policy stops."
Tumbling economic activity in the region has pushed central
bank's into a rate easing cycle, which had an adverse effect on
currencies, which fell sharply over the past months, raising
concerns over economic stability.
The Hungarian debt market was in a wait-and-see mood before
the central bank meeting, while Polish bond prices were gaining
from the zloty's strengthening.
"We have an optimistic opening," said Marek Kaczor, dealer
at PKO Bank. "The bond market has been recently correlated
strongly with the currency and stock market and the wave of
optimism on the stock and zloty is now pushing bond prices up."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.589 28.774 +0.65% -6.42%
Polish zloty <EURPLN=> 4.701 4.747 +0.98% -12.47%
Hungarian forint <EURHUF=> 300.95 303.93 +0.99% -12.43%
Croatian kuna <EURHRK=> 7.473 7.48 +0.09% -1.45%
Romanian leu <EURRON=> 4.28 4.278 -0.05% -6.21%
Serbian dinar <EURRSD=> 94.528 94.78 +0.27% -5.34%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +12 basis points to 191bps over bmk*
4-yr T-bond CZ4YT=RR +32 basis points to +224bps over bmk*
8-yr T-bond CZ8YT=RR -5 basis points to +198bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -9 basis points to +444bps over bmk*
5-yr T-bond PL5YT=RR -15 basis points to +364bps over bmk*
10-yr T-bond PL10YT=RR -9 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +1221bps over bmk*
5-yr T-bond HU5YT=RR +23 basis points to +1068bps over bmk*
10-yr T-bond HU10YT=RR +25 basis points to +904bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1112 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia,
editing by Andy Bruce)
