* Surge in stocks encourages investors in emerging Europe
* IMF upgrade to global GDP forecast adds to support
* Romania, Slovakia industrial output shows promising signs
* Demand strong in Hungary debt auction, yield edges up
(Adds bond yields, Romania and Hungary tenders and CDS moves)
BUCHAREST, July 8 (Reuters) - Central European currencies
edged higher on Thursday, boosted by stronger global stock
markets which encouraged investors to take on perceived riskier
assets in emerging markets.
An International Monetary Fund upgrade to its 2010 global
growth forecast citing robust expansion in Asia and renewed U.S.
private demand supported sentiment, although the IMF also warned
that the euro area's debt crisis posed a big risk to recovery.
[]
"This backdrop creates a supportive start for CEE currencies
with EUR/PLN and EUR/HUF both moving lower in the morning," said
UniCredit analyst Gyula Toth.
Markets are focusing on the European Central Bank's interest
rate decision later in the day and accompanying comments by
officials, which could give fresh direction to emerging European
assets.
"The region is pulled up by the euro/dollar, which broke
through some resistance levels. It looks like profit-taking
before the summer holidays," a Prague-based dealer said.
The Polish zloty <EURPLN=> hit a two-week high against the
dollar and was up 0.4 percent at 4.08 per euro by 0935 GMT.
"It looks like the zloty could be gaining further with the
levels of 4.04-4.05 reachable today," said a Warsaw-based
dealer.
Hungary's forint <EURHUF=> gained 0.6 percent to 281.78 per
euro, and dealers in Budapest said the EUR/HUF pair could go as
far as 281.
The Czech crown <EURCZK=> was up 0.1 percent at 25.449 per
euro.
"The crown has a resistance level at 25.400 per euro. If it
breaks it, then it could go further, possibly up to 25.000," a
Prague-based dealer said.
DEBT IN FOCUS
Demand was strong for a government sale of 50 billion
forints worth of 12-month bills, with investors bidding 99.99
billion forints. The yield edged 2 basis points higher from the
previous auction in June to 5.43 percent. []
Romania holds a tender for 500 million lei in three-year
T-bonds later in the day and analysts expect buyers to push for
higher yields as risks have increased with austerity measures
and an expected deeper contraction in GDP.
"Market makers stand ready to buy this instrument at 7.60
percent, far from the 7 percent paid last time for issuing
bonds," said ING economist Vlad Muscalu.
The cost of insuring the sovereign debt of both Romania and
Hungary fell, with Romanian credit default swaps (CDS) at 372.8
basis points from a previous close of 381. Hungarian CDS fell to
324.3 points, from 332.8.
Romania's leu <EURRON=> was flat, having risen in the last
week since the IMF released the latest tranche of a 20 billion
euro bailout deal for the country.
It was little changed after data showed industrial output
rose 4.1 percent on the year in May. []
"The growth of the industrial output is not enough to keep
the GDP in a positive area. The other branches will contract and
so we will have negative economic growth," said Ionut Dumitru,
chief economist at Raiffeisen Bank in Bucharest.
Slovakia's industrial output also showed promising signs,
rising 31.0 percent year-on-year in May and beating forecasts.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.449 25.483 +0.13% +3.41%
Polish zloty <EURPLN=> 4.08 4.098 +0.44% +0.59%
Hungarian forint <EURHUF=> 281.78 283.35 +0.56% -4.06%
Croatian kuna <EURHRK=> 7.186 7.188 +0.03% +1.71%
Romanian leu <EURRON=> 4.228 4.227 -0.02% +0.22%
Serbian dinar <EURRSD=> 103.75 103.56 -0.18% -7.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +16 basis points to 121bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +138bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +143bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +401bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +372bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +316bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -9 basis points to +594bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +566bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1135 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
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Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
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World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Sam Cage and Reuters bureaus; Editing by Hugh
Lawson)
