* Zloty rises as Polish ratesetter moots steeper hikes
* Polish bonds softer on hawkish comments
* Forint hovers at 11-month highs
(Recasts, updates fixed income)
By Dagmara Leszkowicz and Radu Marinas
WARSAW/BUCHAREST, April 8 (Reuters) - Central European
currencies mostly firmed on Friday, boosted by gains in the euro
and in other higher yielding markets as the dollar weakened.
The zloty <EURPLN=> rose as high as 3.9510 versus the euro,
reaching a six-week peak after a Polish central banker said more
aggressive rate hikes could be on the cards to help tame
inflation.
The currency retreated modestly in late trade, which dealers
said could open the door to a strengthening to around 3.93.
"Global sentiment is favourable. The dollar has weakened
against the euro, which means investors want to buy everything
(in higher-risk markets)," one Budapest-based dealer said.
The euro, the CEE region's reference currency, jumped to a
15-month peak to the dollar a day after the ECB hiked rates and
signalled it was ready to tighten further if needed.
Poland's central bank raised its key rate by a quarter of a
percentage point to 4.0 percent earlier this week, the second
such increase in a tightening cycle that began in January.
The forint <EURHUF=> firmed 0.3 percent by 1340 GMT,
hovering around 11-month highs to the euro, after Hungary posted
a bigger-than-expected trade surplus. []. The
Romanian leu <EURRON=> was up 0.1 percent up.
Economists said the forint outperformance over the past
weeks reflects a focus on carry trades -- given expectations
Hungarian interest rates may soon fall -- as well as an improved
balance of payments.
Carry trades involve borrowing where interest rates are low
and using funds raised to invest in higher-yielding assets.
The key factors to watch next week in Hungary are the
possible announcement of further details of the government's
fiscal reform plans and analyst comments on the expected
trajectory of rates, dealers said.
"At the long end of the (government bond) curve the main
question is whether yields could fall below the 7 percent line
and stay there," one trader said.
Some market participants have begun to expect Hungary to cut
rates already in the next few months and shorter yields may fall
if those voices strengthen, the trader said.
The crown <EURCZK=> edged down 0.1 percent to the euro,
little moved by the resignation of a junior Czech government
coalition party amid allegations of improper financial dealings,
easing tensions in the centre-right coalition. []
FURTHER POLISH TIGHTENING?
A member of the Polish MPC, Andrzej Kazmierczak said the
council may consider more decisive interest rate rises if
inflation tops 4 percent, especially if consumer price
expectations are not tamed. []
Fixed income dealers in Poland said the policymaker's
comments weakened Polish bonds, with yields rising some 1-3
basis points across the curve.
"The inflation reading for March is likely to be the key in
terms of the interest rate outlook," said Marek Kaczor, dealer
at PKO BP. "If it really tops 4 percent, the market will expect
another increase."
Polish inflation data are due on April 13. <PLCPIY=ECI>
The consumer price index rose 3.6 percent on an annual basis
in February, but households' expectations for inflation over the
next 12 months rose to 4.6 percent in March, fuelling a view
that more rate increases lie ahead.
By contrast, Czech central bank Vice-Governor Mojmir Hampl
said on Thursday demand pressures remain subdued and somewhat
weaker than the bank had previously anticipated. []
Czech and Romanian inflation data will be released on
Monday.
"This could be important as those will be the last monthly
inflation figures before the next (Czech) monetary policy
meeting on May 5. However, we only expect small price increases
driven by the higher prices of oil and food," Raiffeisen said in
a note.
The Czech central bank voted 5-1 to keep the main repo rate
at a record low of 0.75 percent in March and while the bank's
latest forecast implied rates on hold till the end of the year,
markets are pricing in a first rate hike by mid-year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.43 24.41 -0.08% +2.33%
Polish zloty <EURPLN=> 3.962 3.967 +0.13% -0.1%
Hungarian forint <EURHUF=> 263.7 264.47 +0.29% +5.42%
Croatian kuna <EURHRK=> 7.363 7.369 +0.08% +0.23%
Romanian leu <EURRON=> 4.109 4.114 +0.12% +3.02%
Serbian dinar <EURRSD=> 101.27 101.873 +0.6% +4.6%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -8 basis points to -16bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +46bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +61bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +312bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +295bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +268bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -8 basis points to +429bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +398bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +355bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1550 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Editing by John Stonestreet)
