* FX cut some losses on profit taking after week's decline
* Czech cbank surprises with rate cut, crown loses
(Updates with Czech cbank, Hungary auction)
By Jason Hovet
PRAGUE, May 6 (Reuters) - Central European currencies fell
for a fifth straight day on Thursday, with risk appetite low
amid persistent fears Greece's debt crisis could spread, while a
surprise rate cut hung on the Czech crown.
Worries the escalating Greek crisis could spread to other
euro zone periphery states like Portugal or Spain have shaken
central Europe's main reference currency the euro and European
stocks, and pushed central European policymakers to move more
cautiously on interest rates and bond issuance.
Central Europe has been hit by selling of riskier assets
despite lower debt piles and better growth outlooks than the
rest of the continent.
Currencies were off early morning lows by midday on Thursday
but dealers see little relief until signs the euro zone's debt
battle is contained.
"We have come quite far in a very short period and are ripe
for some profit-taking," a Stockholm-based central European
currency dealer said. "This isn't over. Investors are fearful
(of contagion) and some may be on the sidelines for some time."
The Hungarian forint <EURHUF=> wiped out half of its early
losses to move off a six-month low, bidding 0.5 percent down on
the day at 279 to the euro by 1210 GMT.
The Polish zloty <EURPLN=> lost 0.4 percent after earlier
touching a new three-month low. It has led losses in the region,
dropping 6 percent in a month.
The crown <EURCZK=> fell as much as half a percent following
an unexpected cut in Czech rates to a new all-time low of 0.75
percent, but the currency then recovered half that loss. It bid
down 0.2 percent from Wednesday's close at 26.046 per euro.
Markets had priced out any chance of a rate cut this week
after the crown lost 2 percent in the Greek market turmoil.
Analysts had also expected no change, but said the bank likely
was influenced by a tame inflation outlook.
"After the Greek problems escalated and the crown weakened,
we did not expect a cut," said Pavel Sobisek, chief economist at
UniCredit in Prague. "The risk of this decision is the crown
exchange rate destabilises."
Analysts said the crown could become more of a funding
currency once market jitters ease. The Czech benchmark interest
rate was now a quarter point below the euro zone rate.
CAUTION
Romania cut rates to a new low of 6.25 percent on Tuesday
and warned of risks from fiscal policy and the Greek crisis.
Central bank Governor Mugur Isarescu said on Thursday there was
now less room to cut rates. []
Polish central bank deputy head Witold Kozinski said on
Thursday the country's euro adoption plan would be delayed
further by Greece's debt crisis, in the latest sign of how the
crisis is delaying or changing policymakers' plans.
Czech Finance Minister Eduard Janota was quoted on Thursday
as saying the market turmoil may limit foreign bond issues to 28
percent of total Czech government issuance.
But the finance ministry later denied the figure and said
its plan was still foreign issuance of up to 50 percent of the
total. [] []
Czech domestic bond yields were little changed even though
dealers said domestic issuance would be heavy in the second half
of the year following Janota's comments.
Hungary sold 5 billion forints less in three-year bonds than
planned <HUISSUE> <HUAUCTION02> on Thursday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.046 25.99 -0.22% +1.04%
Polish zloty <EURPLN=> 4.09 4.072 -0.44% +0.34%
Hungarian forint <EURHUF=> 279.03 277.58 -0.52% -3.11%
Croatian kuna <EURHRK=> 7.256 7.252 -0.06% +0.73%
Romanian leu <EURRON=> 4.178 4.183 +0.12% +1.42%
Serbian dinar <EURRSD=> 99.35 99.193 -0.16% -3.49%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +105bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +101bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1411 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 Jason Hovet; editing
by John Stonestreet and Susan Fenton)
