(Updates with Polish rate decision)
PRAGUE, Dec 23 (Reuters) - The Polish zloty ended 0.2
percent higher on Tuesday after a larger than expected central
bank rate cut, while other emerging Europe currencies eased as
the region battles fallout from global slowdown.
The zloty <EURPLN=> reversed losses after the 75 basis point
rate cut but gave up some gains to bid at 4.106 to the euro by
1536 GMT. Yields on government bonds slipped around 5 basis
points.
"This (rate cut) story has been developing for some time,"
one dealer in Warsaw said. "There were some speculative longs
today in euros, and after the cut was delivered they were
squeezed and we traded (stronger) briefly."
In Hungary, the forint <EURHUF=> was 0.2 percent softer at
263.9. Central Europe's currencies have been hammered in the
last half of 2008 as the global financial crisis and subsequent
economic slowdown seeped further into the region.
But dealers said liquidity remained low on end-of-year
book-keeping.
Stunted demand for central European goods from the
struggling euro zone has taken a toll on once-robust,
export-driven economies in the region, and Poland's cut by 75
basis points followed Hungary's half point trim on Monday.
"Although Poland is a less open economy than its CEE4 peers,
the scale of the move makes sense in our view given the radical
turnaround in the growth outlook and corresponding 180-degree
flip in the mid-term inflation outlook," said Martin Blum,
emerging strategist with UniCredit in Vienna.
"(...) It's fair to expect that the door will be left open
to further meaningful cuts, especially given the European
Central Bank easing cycle."
The reversal of central Europe's currencies from summer
highs has been especially painful for the zloty, which has shed
more than 25 percent since a July record high. Concerns over
losses for companies that hedged the wrong way have added to
concerns and already nervous sentiment in emerging markets.
Data flow over the past month has signalled a darker outlook
for central European economies, and on Tuesday the Polish stats
office said retail sales fell sharply in November.[]
In other trade, the Czech crown <EURCZK=> was off a touch at
26.32 versus the euro, and Romania's leu <EURRON=> fell 0.8
percent to 3.95 to the euro in late trade.
"Many have shorted EUR/RON betting for the impact of
remittances from Romanian workers abroad, but those did not come
up as good as expected and now investors are stopping losses,"
one Bucharest dealer said.
Late on Monday, Romania's new centre-left coalition was
sworn in, raising hopes of swift policy decisions to ward off
the threat of financial crisis. []
In Serbia, the dinar <EURRSD=> lost more than 2 percent as
corporate demand for hard currencies picked up. The central bank
there defied some expectations of lower interest rates by
leaving its main rate on hold on Monday.
The bank governor said on Tuesday a clearer picture of
inflationary pressures in the first quarter of 2009 could help
the bank to start cutting interest rates. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 26.318 26.28 -0.14% +0.68%
Polish zloty <EURPLN=> 4.106 4.115 +0.22% -14.04%
Hungarian forint <EURHUF=> 263.92 263.25 -0.25% -4.38%
Croatian kuna <EURHRK=> 7.242 7.237 -0.07% +1.15%
Romanian leu <EURRON=> 3.951 3.92 -0.79% -10.36%
Serbian dinar <EURRSD=> 87.031 85.14 -2.22% -10.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -11 basis points to 164bps over bmk*
5-yr T-bond CZ5YT=RR +1 basis points to +155bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +122bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -17 basis points to +345bps over bmk*
5-yr T-bond PL5YT=RR -14 basis points to +296bps over bmk*
10-yr T-bond PL10YT=RR -10 basis points to +250bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1637 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; editing
by Tony Austin)
