* Moody's downgrades Hungary, outlook negative
* Forint holds ground, shakes off widening C/A, downgrades
* Stock gains support FX, market quiet region-wide
* Romania holds rates at 10 pct, leu up
* Crown gains as Czechs get closer to a deal on new govt
(Adds details, fixed income)
By Jason Hovet and Marton Dunai
PRAGUE/BUDAPEST, March 31 (Reuters) - Hungary's forint was
steady on Tuesday despite a second downgrade in as many days,
holding ground as rising stocks and political news supported
emerging European currencies.
On Tuesday, Moody's downgraded the Hungarian sovereign to
Baa1, following a cut by Standard & Poor's on Monday. Both
agencies gave a negative outlook to Hungarian assets, but
Monday's market slide did not repeat on Tuesday. []
"Moody's are just following S&P," a dealer said after the
release. "There was no real splash. Soon enough, investors will
go for the kill, though. We are looking at a long, hot summer."
For now, the market calm is partly due to the stronger yen
and dollar, which usually helps emerging markets.
Romania's leu <EURRON=> was steady at 4.235 per euro as the
central bank held rates steady at 10 percent to keep pressure
off the currency.
The crown gained more than 1 percent after news that the
Czech parties there were close to a deal on a new government to
take the helm soon. []
The zloty also gained 1.5 percent after central bank
governor Slawomir Skrzypek said the easing in the currency was
temporary and caused no concerns [].
In Hungary, prime minister designate Gordon Bajnai received
a cool reception, despite plans floated in the local press for a
200 billion forint ($855.4 million) spending cut this year.
[]
"It's not who he is, it's what he does," a dealer said. "And
we don't know that yet."
The forint <EURHUF=> rose 0.6 percent to bid at 309.05 per
euro at 0835 GMT, off lows it traded at on Monday and unfazed by
a widening current account gap in the fourth quarter.
[]
Dealers said the end of the quarter was likely to bring some
short relief to battered central European currencies that have
fallen sharply on worries over growth, financing and banks, with
losses of 14.5 percent already for the forint this year.
"Risk aversion is back a bit," said a central European
currency trader in Stockholm. "(But) we have to keep an eye on
equity markets, sentiment is not as bad as yesterday."
STOCKS REBOUND
Stocks in central Europe rose around 1.5 percent, helping
currencies gain.
Shares in MOL <MOLB.BU> continued their rally, gaining 7.7
percent after another big jump on Monday on news that Russia's
Surgutneftegaz <SNGS.MM> bought a 21 percent stake in the
company for 19,121 forints per share.
FHB bank <FHBK.BU> was flat after Hungary's government threw
it a $128 million capital increase Tuesday. []
Hungarian bond yields rose about 25 basis points but deals
were still few and far between and no trend emerged after the
Moody's downgrade.
"It (the downgrade) could have been bigger, easily," a
dealer said of the move. "Everyone is still waiting for news on
the political situation."
Romania, which had its credit ratings downgraded to below
investment grade, last week followed Hungary in securing a 20
billion euro IMF-led aid package that was accompanied by a
pledge from foreign banks to keep their exposure there.
On Monday, Fitch ratings warned the ongoing global financial
crisis exposed Romanian banks to increased risk. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.299 27.613 +1.15% -2%
Polish zloty <EURPLN=> 4.667 4.737 +1.5% -11.83%
Hungarian forint <EURHUF=> 308.35 310.29 +0.63% -14.53%
Croatian kuna <EURHRK=> 7.47 7.482 +0.16% -1.41%
Romanian leu <EURRON=> 4.237 4.222 -0.35% -5.25%
Serbian dinar <EURRSD=> 94.478 94.588 +0.12% -5.29%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -7 basis points to +236bps over bmk*
4-yr T-bond CZ4YT=RR -28 basis points to +253bps over bmk*
8-yr T-bond CZ8YT=RR -58 basis points to +320bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +434bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +377bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +327bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -28 basis points to +1126bps over bmk*
5-yr T-bond HU5YT=RR -58 basis points to +1059bps over bmk*
10-yr T-bond HU10YT=RR -43 basis points to +916bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1529 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
Marton Dunai, editing by Victoria Main)
