* Zloty retraces IMF gains, but seen as outperformer
* Fitch sees no early euro zone entry
* Leu continues retreat from 3-month high
* Czech bonds stronger after strong auction
(Adds Fitch, background, prices)
By Jason Hovet and Sandor Peto
PRAGUE, April 16 (Reuters) - The Polish zloty retreated on
Thursday from a three-month high hit this week, leading emerging
European peers lower and giving up sharp gains as investors cool
on the country's move to get an IMF flexible credit line.
Appetite for riskier assets rose in the past weeks and
assets in the region got additional help from pledges to bolster
IMF funds for hard-hit emerging economies.
But data showed on Thursday that emerging giant China's
growth slowed more than expected and euro zone industrial output
plunged in February. [][].
Fitch Ratings warned on Thursday that its sovereign ratings
for eastern European states do not build in any expectations
that the European Union would allow them to adopt the euro
unless they meet the strict economic requirements.[]
"Markets are still quite risk driven," said Lutz Karpowitz,
a senior currency strategist with Commerzbank in Frankfurt.
A Budapest-based currency dealer said: "The euro eased
against the dollar, the stock market rally (of the past weeks')
has lost steam, and the whole region is lower now."
The zloty fell 0.6 percent from Wednesday's domestic close
to bid at 4.287 to the euro by 1130 GMT.
It jumped at the start of the holiday-shortened week after
Poland said it would tap the International Monetary Fund's new
flexible credit line, while investors got more bullish on the
country's aims to enter the euro proving ground ERM-2 this year.
Karpowitz said that, while the moves would add support for
the currency, the zloty firming was overdone because no actual
IMF money was flowing in and euro hopes were not certain.
Polish central bank chief Slawomir Skrzypek said on
Wednesday that ERM-2 was not now a top priority. []
"The appreciation has been a bit on thin ice," Karpowitz
said.
The zloty has led central European currency losses since the
second half last year when the region was at record highs,
falling 22 percent, but has been the biggest gainer this month.
Strategists expect the IMF credit line (FCL) could reverse
the zloty's underperformance against regional peers. Barclays
wrote on Wednesday that it expected renewed pressure on the
region's currency as the recent risk rally dwindles.
"And the regional economies will have to grapple with the
(often lagging) effects the sharp economic downturn has on
banking sectors, employment and socio-political stability," it
said. "In such a scenario, however, the FCL has now
significantly reduced the tail risks on PLN."
RETREAT
In Hungary, the forint <EURHUF=> was 0.7 percent down to bid
at 292.60 per euro, and the Czech crown <EURCZK=> dipped to
26.88, weaker by 0.2 percent.
Hungary's new government lost its economy minister designate
but dealers said political developments would have little market
impact until it becomes clear whether the cabinet will be able
to carry out its plans for deep spending cuts. []
Czech bond prices edged up after a Wednesday auction was
three times overbid, but the ministry sold less than previously,
which dealers said gave support after supply concerns earlier.
Romania's leu <EURRON=> shed 0.6 percent to 4.212 per euro
on the back of stop-losses, falling back after touching its
highest since January at 4.11 last week.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.88 26.815 -0.24% -0.47%
Polish zloty <EURPLN=> 4.287 4.261 -0.61% -4.01%
Hungarian forint <EURHUF=> 292.6 290.65 -0.67% -9.93%
Croatian kuna <EURHRK=> 7.365 7.372 +0.1% 0%
Romanian leu <EURRON=> 4.212 4.185 -0.64% -4.69%
Serbian dinar <EURRSD=> 93.12 93.27 +0.16% -3.91%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 176bps over bmk*
4-yr T-bond CZ4YT=RR -21 basis points to +198bps over bmk*
8-yr T-bond CZ8YT=RR -10 basis points to +290bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1330 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 Toby Chopra and Andy Bruce)
