* Yuan news drives zloty to 1-month high, other FX up
* Romania sells a quarter of planned bills at tender
* Hungary central bank keeps rates on hold as expected
(Adds Romania tender, Hungary rate decision)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, June 21 (Reuters) - Poland's zloty jumped
to one-month highs on Monday to lead gains in central European
assets after China allowed the yuan to firm, while Romania cut
its debt offering because upward yield pressure remained high.
The yuan rose to its strongest since July 2005, giving a
boost to risk appetite that analysts said would help kick-start
more appreciation in central Europe. []
The region has struggled to shake off worries over the euro
zone's debt crisis spreading, despite lower debt and better
growth prospects, but volatility has dropped slightly in the
past week, raising asset prices.
Debt tenders, though, have stayed under pressure from rising
yields, and Romania sold roughly a quarter of what it planned at
a one-year T-bill tender on Monday.
Many of the ministry's auctions have failed or fallen short
since May 6, around when Romania announced an austerity plan to
meet conditions of its IMF loan. The average yield jumped 56
basis points to 6.85 percent on Monday: investors are wary
planned fiscal cuts may not go as planned [].
Analysts said the ministry's signalled strategy of only
accepting yields below 7 percent was a risk and it may be forced
to pay higher yields in the future as funding needs pile up.
"I don't think they will manage to sell more at these levels
even if the IMF tranche is disbursed, because this is not only a
domestic issue," a trader said. "There are sovereign woes all
across Europe."
Hungary left interest rates at a record low of 5.25 percent
as expected on Monday. []
By 1233 GMT, stock markets had risen up to 2.5 percent led
by Bucharest <>, and the Thomson Reuters Equity Emerging
Markets Europe Index <.TRXFLDEETU> had gained 0.8 percent.
The Hungarian forint <EURHUF=> rose 0.3 percent to bid at
278.27 per euro, around its highest since June 3. The forint's
strength lifted bond prices, pushing yields down 7-20 basis
points.
Romania's leu <EURRON=> edged up and the Czech crown
<EURCZK=>, the region's top performer this year, was flat.
In Poland, acting president Bronislaw Komorowski won a first
round of a presidential ballot on Sunday, but faces a tight
runoff vote against Jaroslaw Kaczynski, twin brother of the
former president killed in a plane crash in April.
A Komorowski win in a July 4 runoff will likely be cheered
by markets, because investors fear Kaczynski may use his right
to veto to block fiscal reforms. []
The likely tight result pushed bond yields up 3-6 basis
points, but the zloty <EURPLN=> jumped half-a-percent, leading
regional gains triggered by yuan's rise.
EXPORT BOOST?
Analysts said China's decision could help growth in
export-heavy emerging European countries, which are part of the
supply chain for euro zone states whose goods will become
cheaper in Asia because of the stronger yuan.
"The outlook still depends on recovery in western Europe and
central banks in the region. We see gradual appreciation (to the
end of the year) of these currencies, but at a slow pace," said
Ulrich Leuchtmann, head of FX research at Commerzbank, who
doubted the yuan news would have much of a lasting effect.
Societe Generale's emerging market strategist Murat Toprak
said declining volatility will lead to short-covering that will
benefit the region.
He targets the zloty at 3.95 to the euro and the forint at
270 per euro in two to three weeks.
The zloty and Czech crown are seen by analysts as posting
the biggest gains going into next year with their economies
leading an export-driven regional recovery. []
A Reuters poll on June 3 forecast the crown at 25 per euro
in six months, and the zloty at 3.81, 2.9 percent and 5.8
percent above current levels. <CEEFXPOLL01>
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.752 25.737 -0.06% +2.2%
Polish zloty <EURPLN=> 4.036 4.054 +0.45% +1.68%
Hungarian forint <EURHUF=> 278.37 279.29 +0.33% -2.88%
Croatian kuna <EURHRK=> 7.197 7.2 +0.04% +1.56%
Romanian leu <EURRON=> 4.231 4.24 +0.21% +0.15%
Serbian dinar <EURRSD=> 103.51 103.527 +0.02% -7.37%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 153bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +162bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +152bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +409bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +371bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +310bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -19 basis points to +614bps over bmk*
5-yr T-bond HU5YT=RR -11 basis points to +558bps over bmk*
10-yr T-bond HU10YT=RR -7 basis points to +478bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1533 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; Editing by Ruth Pitchford)
