(Adds details, fixed income)
PRAGUE, Jan 5 (Reuters) - Central Europe's currencies mostly
strengthened at the start of the year's first full trading week
on Monday, with the Polish zloty jumping more than 1 percent as
some optimism crept back into markets.
In Hungary, the forint edged lower before a non-rate setting
central bank meeting later in the day. However, some were
betting it could actually bring an extraordinary cut in rates.
The region's currencies ended 2008 on a sour note when the
global financial turmoil crashed into emerging Europe, wiping
out strong gains from the first half of the year.
Weak growth outlooks and falling inflation are expected to
prompt more monetary policy easing going into 2009, which
analysts say will weigh on currencies.
But on Monday, the zloty <EURPLN=> led gains with a 1.3
percent rise from Friday's levels to 4.116 per euro by 1037 GMT,
and the Czech crown <EURCZK=> added 0.5 percent to 26.71.
"We've got a new year and more optimistic opening. A
year-end weakening (of the zloty) was caused by a demand on hard
currencies as a result of FX transactions," said a dealer at
Warsaw-based bank.
In Romania and Hungary, where domestic markets were shut on
Friday, the leu <EURRON=> edged up 0.15 percent and the forint
<EURHUF=> dipped 0.2 percent to 266.97 per euro.
The Croatian kuna <EURHRK=> firmed 0.5 percent, up from last
week's low of 7.3755/7.3805, due to the central bank's new
mandatory reserve regulation.
Investors in Hungary were watching for a central bank
statement at 1300 GMT after a non-policy meeting.
"Some people are expecting an extraordinary rate cut, if
this does not happen, the forint can strengthen further," a
currency dealer said.
Hungary's central bank has cut in half an emergency October
300 basis point hike in October and surprised with a reduction
at a non-policy meeting last month.
But bond markets stayed quiet and dealers were mixed over
whether Hungary's bank would opt to discuss rates.
"It's a very quiet market and it's not really trading on
rate cut expectations," a bond dealer said. "I don't think
they'll cut today... (but) I think 50 basis point cuts are
priced in for each of the next three months."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.713 26.846 +0.5% +0.15%
Polish zloty <EURPLN=> 4.116 4.171 +1.32% -0.02%
Hungarian forint <EURHUF=> 266.97 266.39 -0.22% -1.3%
Croatian kuna <EURHRK=> 7.3 7.336 +0.49% +0.88%
Romanian leu <EURRON=> 4.025 4.031 +0.15% -0.26%
Serbian dinar <EURRSD=> 89.23 89.67 +0.49% +0.28%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 179bps over bmk*
5-yr T-bond CZ5YT=RR -8 basis points to +161bps over bmk*
10-yr T-bond CZ9YT=RR -7 basis points to +119bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -12 basis points to +339bps over bmk*
5-yr T-bond PL5YT=RR -7 basis points to +287bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +237bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +778bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +724bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +548bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1138 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet)
