* Dealers say Romania cbank intervenes to weaken leu
* Short-term yields dip on dovish Czech cbank comments
* Markets eye other CEE cbank meetings next week
* Little immediate impact seen from Greek safety net move
(Updates throughout)
By Marius Zaharia
BUCHAREST, March 26 (Reuters) - The Romanian leu weakened on
Friday, with dealers citing central bank intervention and Czech
short-term bond yields dipped amid signs an interest rate cut
was not yet off the cards.
Dealers saw little immediate impact on the region's
currencies from Thursday's decision by euro zone leaders to
provide a joint European-IMF financial safety net for
debt-stricken Greece. []
The Romanian leu <EURRON=> was 0.3 percent weaker at 1046
GMT, after hitting 14-month highs earlier this week. Dealers
said the central bank bought euros through local banks in a bid
to prevent the unit from firming towards levels that could hurt
exporters and hamper economic recovery. []
"While it was inevitable for the central bank to step in ...
we expected interest to buy EUR/RON around 4.00, but it seems
that the central bank drew a line in the sand at around 4.05,"
4CAST analyst Piotr Matys said in a note.
The central bank declined comment.
In the Czech Republic, short-term bond yields dropped 10
basis points and the two-year IRS was 17 basis points down from
Wednesday's close in reaction to dovish comments by the central
bank following a decision to leave rates at 1 percent.
Governor Zdenek Tuma surprised markets on Thursday by saying
two board members voted for a cut and that further easing could
not be ruled out []
Markets had been pricing in rate hikes later this year in
the Czech Republic, but the strength of the local currency,
sluggish domestic demand and low inflation could mean rates will
stay low for a longer period than initially expected.
"We expect the reaction (to the central bank vote/comments)
will continue today (on Friday), given the fact that markets
have not priced in the rate cut scenario with higher probability
so far yet," Komercni Banka dealers said.
Raiffeisenbank also changed its recommendation for Czech
government bonds with up to two year maturities back to neutral,
from sell.
RATE MEETINGS
Central banks in Hungary, Romania and Poland hold
rate-setting meetings next week.
Romania is expected to cut rates by 50 basis points to a
record low of 6.5 percent on Monday, taking advantage of a
strengthening leu []. Hungary is seen easing by 25
basis points to 5.5 percent on the same day. []
All analysts polled by Reuters saw rates unchanged at 3.5
percent in Poland at a meeting next Wednesday. []
The median forecast of analysts still puts the central bank's
key rate at 4 percent at the end of 2010 but conviction seems to
be waning over the two small hikes that implies.
On Friday, the crown <EURCZK=>, the Polish zloty <EURPLN=>,
and the Hungarian forint <EURHUF=> were down 0.3-0.5 percent.
Dealers said some of the outflows from the euro zone caused
by Greece's problems have entered central Europe recently.
But those positions are not expected to reverse immediately
as the inclusion of the International Monetary Fund in the Greek
package dented the image of the euro zone as able to handle its
own problems.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.387 25.315 -0.28% +3.67%
Polish zloty <EURPLN=> 3.886 3.876 -0.26% +5.61%
Hungarian forint <EURHUF=> 264.75 263.42 -0.5% +2.12%
Croatian kuna <EURHRK=> 7.258 7.26 +0.03% +0.71%
Romanian leu <EURRON=> 4.064 4.053 -0.27% +4.27%
Serbian dinar <EURRSD=> 99.53 99.763 +0.23% -3.67%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -7 basis points to 76bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +104bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +91bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +374bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +297bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +237bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1246 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 []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Susan Fenton)
