* Zloty at 2-week low, other FX steady
* Hungary's bond auctions attract bids, sales to continue
* Region's bonds market seen to recover slowly
(Recasts with zloty, updates prices)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, April 23 (Reuters) - Investors pushed the
Polish zloty to a two-week low on Thursday with short bets
following last week's rally, while strong demand greeted
Hungary's first bond auctions in months.
The zloty has rollercoastered in April, hitting a 3-month
high last week on the back of an expected International Monetary
Fund flexible credit line but giving up 4 percent gains since.
It slipped 1.4 percent to 4.467 to the euro by 1435GMT, with
dealers saying offshore players moved to buy the euro against
the zloty after taking long positions following the IMF news.
"Some funds or banks seem to be getting their (euro)
positions back," a London-based dealer said, adding it was
mainly U.S. players buying euros.
Poland's euro ambitions, a supporting factor in the past,
hit a bump on Wednesday when data showed the 2008 general
government deficit exceeded the EU's 3 percent ceiling.
Currencies have dropped by up to a quarter after the global
financial turmoil escalated last autumn, but have rebounded in
the past two months, led by the zloty's 10.1 percent gain, as
investors take on more risk.
A survey last week showed aggregate flows to emerging
markets registered its highest reading in almost two years.
The sentiment has lifted debt markets, and Hungary's
auctions were only the second batch of local issuance since a
halt to debt sales in October, when funds sold off central
European bonds and Hungary grabbed a $25 billion IMF lifeline.
MORE TO COME
Hungary sold almost all bonds offered in the three auctions
and the debt agency said it would continue with regular sales
after demand was several times oversubsribed. []
Analysts said it was another positive signal following
well-bid auctions in the Czech Republic and Poland this month.
"The fact that this auction was successful... the market
might be trying to strengthen or improve the duration exposure
in their portfolios," said Luis Costa, Commerzbank's head of
emerging debt strategy in London.
Among currencies, the forint <EURHUF=> eased 0.2 percent to
bid at 297.6 to the euro. The Czech crown was 0.1 percent off at
26.913, while Romania's leu <EURRON=> was unchanged at 4.243,
with around 1 percent stock gains giving support.
Hungary had tested markets with a single auction in
February. Bond markets have stabilised some with yields coming
down from February highs, including a 200 basis point drop for
Hungarian papers, supported by debt agency buybacks.
But whether the improvement can be maintained depends on
global sentiment and an end to capital outflows, analysts said.
"I'm not entirely sure we are at the end of this process so
we might have some residual capital flows to go," Costa said.
"But alluring yields have to trigger some inflows back."
Strategists also remain cautious on currency recovery,
tipping the zloty to outperform against peers but also saying
pressure against the euro will remain as the economic outlook
stays grim, which will hit jobs and banks.
The IMF on Wednesday forecast a 3.7 percent economic drop in
emerging Europe in 2009, with no country escaping recession.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.913 26.885 -0.1% -0.59%
Polish zloty <EURPLN=> 4.467 4.403 -1.43% -7.88%
Hungarian forint <EURHUF=> 297.6 297.07 -0.18% -11.44%
Croatian kuna <EURHRK=> 7.426 7.38 -0.62% -0.82%
Romanian leu <EURRON=> 4.243 4.243 0% -5.39%
Serbian dinar <EURRSD=> 94.236 93.607 -0.67% -5.05%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -7 basis points to 172bps over bmk*
4-yr T-bond CZ4YT=RR +5 basis points to +189bps over bmk*
8-yr T-bond CZ8YT=RR -7 basis points to +276bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +409bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +343bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +890bps over bmk*
5-yr T-bond HU5YT=RR +28 basis points to +833bps over bmk*
10-yr T-bond HU10YT=RR -16 basis points to +727bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1638 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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emerging market news []
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(Reporting by Reuters bureaus, Writing by Jason
Hovet/Dagmara Leszkowicz; Editing by Toby Chopra/Victoria Main)
