* Forint at highest since end-Aug on S&P outlook revision
* Leu stable as leftists' comments support unit
* Zloty continues gains on govt deal with Eureko
* Czech cbank comments on intervention knock crown
(Updates throughout)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Oct 5 (Reuters) - Hungary's forint rose to
its highest since late August on Monday in a further positive
reaction to a ratings outlook lift by Standard & Poor's, while
easing political tensions steadied the Romanian leu after it
plumb six-month lows.
The moves highlighted an apparent end to months of a mostly
uniform region-wide rally and underscored how factors ranging
from politics, monetary policy and corporate news may cause
divergence in assets as the fragile recovery takes root.
Poland's zloty led the region with further gains from last
week's government deal with Dutch company Eureko that assured
markets no huge dividend payments will flood the market.
On the other side, comments from the Czech central bank
chief signalled the bank sees the crown as overvalued, pushing
the currency to a three week low.
"I think currencies are in for some stabilisation, or some
weakness," said Stuart Bennett, currency strategist at Calyon.
"But there is no clear direction. You know the worst of the
recession is behind but there are still some big question
marks."
The forint <EURHUF=> got a boost on Friday when S&P revised
Hungary's sovereign rating outlook to stable from negative,
saying the government's measures will contain a deterioration in
finances despite a deep recession. []
Hungary's bonds were mixed on Monday, while the currency
inched up 0.2 percent to 267.26 after edging to the strong side
of 267 earlier for the first time since the end of August.
In Romania, which like Hungary has been backed by external
aid, the leu <EURRON=> was stable at 4.263 per euro after a
pledge from the country's Social-Democrats (PSD) on Saturday to
support the minority government in meeting conditions for the
International Monetary Fund.
The Social Democrats quit the coalition government on
Thursday in protest at the sacking of a minister before
November's presidential election.
"This has calmed the market, it is even possible the leu
will firm," one Bucharest-based dealer said.
Some dealers say the central bank may take up interventions
again on the FX market when the leu falls significantly.
THE OTHER SIDE OF THE STORY
The zloty <EURPLN=> rose 0.3 percent to further gain on a
government deal with Dutch company Eureko on Friday to regain
full control of the region's biggest insurer, PZU, which will
pay a special dividend of 12.75 billion zlotys. []
Concerns that Eureko would convert the dividend payout into
euros, flooding the market with the Polish currency, had helped
to drive the zloty <EURPLN=> to its lowest level in two months.
The zloty has been viewed by strategists as the
best-positioned currency in the region, backed by the only
economy that has avoided central Europe's recession.
Meanwhile, the safe-haven Czech crown <EURCZK=>
underperformed with a 0.3 percent fall after bank chief Zdenek
Tuma said policymakers would consider intervening on the foreign
exchange market to weaken the crown or cut interest rates if the
currency keeps firming, although the bank is no fan of
intervention. []
"We could move weaker very quickly," David Sykora, a CSOB
dealer, said. "The crown looks really overvalued."
The crown has been the only major currency in the region to
show a gain this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.49 25.414 -0.3% +4.95%
Polish zloty <EURPLN=> 4.219 4.23 +0.26% -2.47%
Hungarian forint <EURHUF=> 267.26 267.84 +0.22% -1.39%
Croatian kuna <EURHRK=> 7.258 7.258 0% +1.47%
Romanian leu <EURRON=> 4.263 4.268 +0.12% -5.83%
Serbian dinar <EURRSD=> 93.14 92.977 -0.18% -3.93%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -9 basis points to 157bps over bmk*
7-yr T-bond CZ7YT=RR -8 basis points to +178bps over bmk*
10-yr T-bond CZ10YT=RR -8 basis points to +170bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -11 basis points to +545bps over bmk*
5-yr T-bond HU5YT=RR +7 basis points to +535bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +478bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1634 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz; Editing by Chris Pizzey)
