* Central bankers verbally intervene to lift FX
* Currencies firm on c.bank talk, better global sentiment
* Hungary leaves interest rates unchanged
* Poland sticks to euro plans
(Adds fixed income, quotes)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, Feb 23 (Reuters) - The Polish zloty, Czech
crown and Hungarian forint jumped on Monday, wiping out recent
losses after central bankers in the region said in a coordinated
verbal intervention that falls were overdone.
Hungary's central bank left rates unchanged at 9.5 percent,
marking a likely pause or reversal in many of emerging Europe's
monetary policy easing cycles as looser rates have added to
swiftly depreciating currencies already hurt by a sinking
economic outlook. []
Central Europe's central banks took the unprecedented step
of joint verbal intervention on Monday to support their region's
currencies that sank to multi-year or record lows in the past
week, saying their sharp drop did not reflect their economic
fundamentals. [] []
"We do need to see these words backed by hard action, but
this is a concerted defence by the central banks of their
currencies," said Martin Blum, emerging strategist with
UniCredit in Vienna.
"...It's a good sign that the countries are speaking
together, they have been a little bit too relaxed previously."
The Czech, Hungarian and Polish currencies jumped around 1
percent to add to strong gains from the morning after the verbal
interventions, but later gave up those gains.
By 1603 GMT, the forint <EURHUF=> had risen 2.35 percent
since Friday to the strong side of 300 per euro, and the Polish
zloty <EURPLN=> gained 2.3 percent. The Czech crown <EURCZK=>
added 1.8 percent, while Romania's leu <EURRON=> traded even.
Currencies were also helped by a media report that said the
U.S. government could raise its stake in Citigroup, which lifted
stocks and weakened the dollar. []
Hungarian bond yields dropped sharply from recent highs on
the firmer currency and strengthening swap rates, dealers said.
Markets had clawed back some losses last week to cap a
rollercoaster five days as worries over emerging Europe's
foreign debt exposure grew, and today's gains have put
currencies up on par with closing levels on Feb. 13.
The steep falls last week had rattled western banking
stocks, prompted policymakers to verbally step in, and many
strategists called the rapid declines overdone. []
Poland had converted EU funds to prop up the zloty last
week, while Hungary's prime minister asked the central bank last
week to explore "unconventional" means to stem forint losses.
"I think the forint will target 300 again in the short
term," a Budapest dealer said. "But the situation changes very
quickly... Guessing what comes next is something like playing
the lottery now."
The weak currencies have caused borrowing costs to rise for
households and businesses in Hungary, Romania and Poland that
sought cheaper foreign currency loans in the past -- but give
small relief to exporters that have seen demand for their goods
sink in the recession-hit euro zone.
Volatile currencies and rising budget deficits in the wake
of the global economic crisis have also put doubt on
government's ambitions to adopt the euro zone's single currency.
In Poland -- which aims to join the euro zone the soonest
after central Europe's smallest state Slovakia switched to euros
this year -- a deputy finance minister said the country could
enter the testing ground ERM-2 by early June. []
Polish companies have been hurt badly by wrong-way bets the
zloty would continue to rise from record highs last summer.
[] The unit has been among the worst-performing
emerging currencies since, and has lost 11.3 percent this year.
The forint is down 11.3 percent also in 2009, while the
crown is off 5.3 percent and the leu 6.3 percent.
Prime Minister Donald Tusk said on Friday the worst is past
for the zloty [], but many analysts see more
weakening before a second-half rebound for the region.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.257 28.774 +1.83% -5.32%
Polish zloty <EURPLN=> 4.64 4.747 +2.31% -11.31%
Hungarian forint <EURHUF=> 296.96 303.93 +2.35% -11.25%
Croatian kuna <EURHRK=> 7.383 7.48 +1.31% -0.24%
Romanian leu <EURRON=> 4.282 4.278 -0.09% -6.25%
Serbian dinar <EURRSD=> 94.047 94.78 +0.78% -4.86%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 218bps over bmk*
4-yr T-bond CZ4YT=RR +30 basis points to +235bps over bmk*
8-yr T-bond CZ8YT=RR -3 basis points to +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -67 basis points to +1159bps over bmk*
5-yr T-bond HU5YT=RR -62 basis points to +999bps over bmk*
10-yr T-bond HU10YT=RR -46 basis points to +849bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1708 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 []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus, writing by Marius
Zaharia/Jason Hovet, editing by Ron Askew)
