*Forint leads fx gains, near key level at 267.40/EUR
*Stocks gain, bonds mixed, Latvia a risk
(Adds bonds, new comments and prices.)
BUDAPEST, July 24 (Reuters) - Emerging Europe's currencies
firmed on Friday as global appetite for riskier assets held up,
but some easing may be on the cards after a recent rally,
dealers said.
The forint <EURHUF=> led gains, trading 0.6 percent stronger
versus the euro 0927 GMT. The crown <EURCZK=> and the
leu<EURRON=> followed with 0.4 percent rise, while the zloty
<EURPLN=> added 0.2 percent.
Stocks were also stronger around the region. Polish
government bonds firmed slightly, while Hungarian bonds took a
pause after a rally in the past weeks.
Investor attitude towards risk remains favourable for
emerging market assets, dealers said.
But Polish and Hungarian retail figures published late this
week reminded that the global crisis is taking a heavy toll on
the region's economies, and Latvia's struggle to maintain IMF
financing to the country casts a shadow on regional markets.
"Too bad news from Latvia could block the firming trend (in
Hungary's bond market)," one Budapest-based trader said. "Yields
may even fall after (Monday's central bank) rate decision, but
they have come down a lot, a correction would be natural."
Analysts said currencies in the region can suffer if Latvia
is left without external support.[]
RATE MEETINGS AWAITED
Hungary, which this month reduced reliance on IMF funding by
boosting its bond sales, was told by the IMF on Thursday that it
should focus on reducing debt rather than just financing it.
The IMF's resident representative in Hungary also told
Reuters that a recent easing of financial strains along with a
projected decline in inflation provided scope for gradual and
cautious interest rate cuts in Hungary.[]
Hungary's calendar-adjusted retail sales <HURETY=ECI> fell
by an annual 4.2 percent in May after a 4.1 percent drop in
April, the Central Statistics Office said on Friday, indicating
that the economy continued to perform poorly.
The forint could firm a little further, but the range is
about 267-271 versus the euro, which allows weakening as well, a
dealer in Budapest said, adding that some investors opened long
positions ahead of the central bank's rate decision, due Monday.
"It's unclear how far we can strengthen," he said. "We'll
probably see the trajectory clearer after the rate decision. I
don't think the forint is firmly back on a strengthening path."
KBC said in its daily regional market note that the forint
would probably need additional stock market gains to break the
key 267.40 level against the euro.
A Reuters poll showed on Thursday that most analysts expect
a 50-basis-point rate cut on Monday. [] Poland's
central bank is seen holding fire next week as the global crisis
hurt Poland less than other economies in the region.
The Czech crown is also seen taking a breather after hitting
its strongest level so far this year.
"With the end of the week the likelihood of a correction on
global markets as well as on the Czech crown has risen,"
Komercni Banka said in a note.
If Friday's close is on the stronger side of 25.70, the next
resistance is at 25 per euro, dealers said.
In Romania, dealers expect slight firming of the leu, the
most stable regional currency, which has moving around 4.2 per
euro in an illiquid market since Romania's IMF deal in March.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.47 25.58 +0.43% +5.04%
Polish zloty <EURPLN=> 4.213 4.22 +0.17% -2.33%
Hungarian forint <EURHUF=> 267.65 269.21 +0.58% -1.53%
Croatian kuna <EURHRK=> 7.309 7.318 +0.12% +0.77%
Romanian leu <EURRON=> 4.214 4.229 +0.36% -4.74%
Serbian dinar <EURRSD=> 92.96 93.047 +0.09% -3.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 147bps over bmk*
4-yr T-bond CZ4YT=RR -2 basis points to +163bps over bmk*
8-yr T-bond CZ8YT=RR +14 basis points to +294bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -8 basis points to +360bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +289bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +266bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -27 basis points to +702bps over bmk*
5-yr T-bond HU5YT=RR -64 basis points to +619bps over bmk*
10-yr T-bond HU10YT=RR -51 basis points to +511bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1127 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai; Editing by Andy Bruce)
