* Bucharest dealers says c.bank likely intervened
* Forint down half percent, sticks at lows after rates held
* Zloty dips on dovish cbank comments
(Adds suspected leu intervention, more details)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Feb 21 (Reuters) - The Romanian leu rose to a
five-month high on Monday in what dealers said looked to be
central bank intervention, while Hungary's forint held near
session lows after the central bank left interest rates on hold.
Intervention by the central bank, which never comments on
market activities, was the first this year and helped the leu to
buck a weakening trend in emerging Europe caused by falling risk
appetite.
The region's currencies came under pressure from falling
stock markets, a drop in the euro, spreading anti-government
protests in Libya and the Middle East, and ongoing concern over
euro zone peripheral Portugal's high budget deficit.
To counter this, Bucharest dealers said the central bank
looked like it stepped in the market indirectly through banks.
"We suspect the central bank indirectly sold euros through
two local banks," said one dealer with a foreign bank in
Bucharest.
Another dealer said volumes were twice those of a normal
trading day.
"It seems they are afraid of inflationary pressures ...
looming food inflation is a reality," the dealer said.
Dealers have said the bank intervened last year to keep the
currency in a tight band of around 4.1-4.3 per euro and the
government frequently baulks at selling debt at high yields.
By 1551 GMT, the leu <EURRON=> added 0.3 percent to bid at
4.227 to the euro. The Czech crown <EURCZK=> was flat, while the
forint <EURHUF=> fell 0.5 percent from Friday, but remained
steady after the rate decision.
HUNGARY RATES
The Hungary central bank, as expected, kept interest rates
unchanged at 6 percent in its last meeting before four new
members join the Monetary Council, after a string of
three-quarter point rate rises. []
The bank said these rate increases would help inflation fall
to its target as the direct impacts of cost-side shocks fade.
"That is no surprise to us -- or anybody else for that
matter," said Lars Christensen, economist at Danske Bank. "With
growth still lacklustre and inflation set to moderate there is
really no reason for hiking rates at the moment."
Analysts have said board changes could lead to looser policy
as appointments will be made by the centre-right Fidesz
government which has openly criticised the bank for raising
interest rates.
Bond yields remained unchanged after the decision. Forward
rate markets still priced an additional hike in three months,
but dealers have said this would likely be priced out if
government reform plans, due to be unveiled next month, meet
market expectations.
Hungary and Poland are the only two central European
countries to have started raising interest rates, with the
Czechs likely on hold in the coming months. Romania is expected
to try to loosen policy to boost its economy.
The Polish zloty <EURPLN=> lost 0.6 percent to the euro on
weakening market sentiment and comments of Poland's central bank
governor that pointed to a more moderate pace of its own
monetary policy tightening.
Markets have raised bets the Monetary Policy Council will
follow a January rate rise from a record low with another hike
at the council's March meeting. []
Central bank head Marek Belka said on Monday it should act
with moderation if there is no wage pressure and the January
rise would not be followed by a "cascade" of further hikes.
"We're less confident now with a possible rate hike in March
(after Belka's comments), but we also bear in mind that his
comments are more ambiguous recently," said Rafal Benecki,
senior economist at ING bank in Warsaw.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.452 24.443 -0.04% +2.24%
Polish zloty <EURPLN=> 3.938 3.915 -0.58% +0.51%
Hungarian forint <EURHUF=> 271.00 269.56 -0.53% +2.58%
Croatian kuna <EURHRK=> 7.405 7.405 0% -0.34%
Romanian leu <EURRON=> 4.227 4.24 +0.31% +0.14%
Serbian dinar <EURRSD=> 103.15 103.1 -0.05% +2.69%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 37bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +84bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +87bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +520bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +487bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +431bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1659 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Jason Hovet and
Dagmara Leszkowicz; Editing by Stephen Nisbet)
