* FX weaker before G20; crown, forint lead drop
* Leu off low but politics keep pressure
* Czech bond yields dip after 5-session rise
(Adds bonds, details)
By Jason Hovet
PRAGUE, Oct 22 (Reuters) - The Czech crown dropped to a
five-week low on Friday and the Hungarian forint fell back as
investors took an opportunity to lock in profits, and traders
said the crown looked vulnerable to further weakening.
Investors were also wary that G20 finance ministers meeting
in South Korea could strike a deal that could affect the euro -
the region's benchmark currency.
Shares in Budapest <> lost 1.8 percent on some
profit-taking after hitting a five-month peak during the week,
taking some support away from the forint and pushing it down 0.3
percent to 275.48 per euro by 0859 GMT.
Prague dealers said a German euro buyer was weakening the
crown, taking it out of the 24.500-24.600 range it had stuck
around this month. It bid 0.2 percent weaker at 24.652 per euro,
off an early low of 24.71.
"We hit the 55-day moving average at 24.660, which defines
the downward trend (for the crown), so if we close above it
today, it could then go back to the 25.00 (per euro)," a Prague
dealer said.
"There were a lot of shorts, which will be closed now."
The crown has been the biggest gainer among central European
currencies this year, backed by a growing economic recovery and
government pledges to rein in the budget. It has not traded
above the 25 level since July.
But a rise in a business sentiment survey in Germay, a main
trade partner with central Europe, also failed to lift
currencies on Friday.
Klaus Abberger, an economist with Ifo research institute
that runs the survey, said currency tensions are threatening the
world economy and an unpleasantly quick appreciation of the euro
<EUR=> is problematic for German companies. []
Emerging Europe policymakers have generally viewed currency
appreciation over the past year in the past year as positive.
[]
LEU POLITICS
Markets were keeping an eye on the meeting of Group of 20
finance and central bank chiefs in South Korea that aims to find
common ground on currency, trade and macroeconomic imbalances
ahead of a leadership meeting next month. []
Emerging markets have benefitted from a weaker dollar that
investors have used to buy riskier assets.
"I wouldn't read too much in today's market moves," said
Cheuvreux analyst Simon Quijano-Evans.
"For emerging markets in general (what is important) is to
see what will come out of the meeting with regard to the
euro/dollar, and that will have direct implications for the
currencies in the region."
In Romania, the leu <EURRON=> edged up 0.3 percent,
recovering slightly from a 15-week low. The Polish zloty
<EURPLN=> was steady.
The leu has been dogged by persistent uncertainty over the
government's International Monetary Fund-backed austerity drive.
The fragile coalition government is likely to survive a
no-confidence vote next week, but a widely expected slim
parliamentary backing would mean the government would need to
struggle to implement austerity measures.
An IMF mission is in Bucharest to review Romania's progress
in meeting conditions of its 20 billion euros aid package.
On bond markets, Czech yields dipped 3-4 basis points after
creeping up over the past five trading sessions. Yields have
gradually climbed since hitting lifetime lows in September.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.652 24.593 -0.24% +6.76%
Polish zloty <EURPLN=> 3.971 3.969 -0.05% +3.35%
Hungarian forint <EURHUF=> 275.48 274.7 -0.28% -1.86%
Croatian kuna <EURHRK=> 7.336 7.337 +0.01% -0.37%
Romanian leu <EURRON=> 4.313 4.324 +0.26% -1.75%
Serbian dinar <EURRSD=> 106.24 106.27 +0.03% -9.75%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 74bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +70bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +99bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1100 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 Patrick Graham)
