(Updates throughout)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Jan 26 (Reuters) - Most central European
currencies recovered on Monday from fresh lows hit last week,
taking a pause from recent weakening, helped by an improvement
in global stocks and appetite for risk.
Shares worldwide were boosted by optimistic news from the
banking sector, including Barclays <BARC.L> saying it was not
seeking fresh capital, while ING <ING.AS> addressed risks to its
business by making use of state loan guarantees [].
Investors also foresee progress in the U.S.'s $825 billion
economic aid plan and are pricing in further action to rescue
the world's largest economy during the Federal Reserve's meeting
on Tuesday and Wednesday.
All that gave regional currencies some breathing space after
a hammering so far this year due to a raft of poor economic data
that has already prompted central banks to respond with sharp
cuts in interest rates and upped expectations more is to come.
The Polish zloty <EURPLN=> rose 1.6 percent, the Czech crown
<EURCZK=> gained 1.7 percent, the Romanian leu added <EURRON=>
1.5 percent, while Hungary's forint <EURHUF=> rose 1.4 percent.
"The news about Barclays created better sentiment in the
morning, and the news generally about banks (in Europe)," one
Budapest dealer said.
However, the weakening pressures on regional currencies
remain as the global financial crisis deepens. For the Czech
crown, UBS said it still recommended a long euro/crown position.
"Since the time we put out this trade we believe this
position has become crowded and we would not be surprised to see
some profit taking leading to shallow declines (in levels)," its
analysts added in a Monday note.
In other trade, Croatia's kuna <EURHRK=> was 0.4 percent
down and Serbia's dinar <EURRSD=> fell 0.5 percent on corporate
demand, despite central bank interventions in both countries.
CUTTING RATES
Central Europe's central banks are expected to continue
easing monetary policy to fight a sharper-than-expected slowdown
in the once-booming economies, with Hungary already set for
recession.
Polish December retail sales data came out above consensus
on Monday, but were offset by rising unemployment figures.
Hungary's drop in retail sales and comments from Czech central
bank governor who said economic growth may be close to zero
added to the gloom. []
Analysts say Poland's central bank is likely to cut another
50 basis points off interest rates on Tuesday, though at 5
percent they are still well above those in Western Europe.
[]
"It is very clear Poland is in for a very sharp slowdown ...
the MPC (central bank) will decide to cut rates by 50 basis
points (this month)," said David Hauner of Bank of America in
London.
Romanian and Czech central banks are seen cutting rates next
week as well.
In debt markets, news of Czech Republic returning to the
eurobond market [] failed to spark interest, while
yields on Hungarian government bonds slipped 10-15 basis points
in low turnover.
Hungary's state debt agency expects to resume regular bond
issuance -- which ceased in October -- in the second quarter,
but may conduct one offering in February, its deputy CEO said on
Monday. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.622 28.097 +1.72% -3.15%
Polish zloty <EURPLN=> 4.352 4.421 +1.59% -5.45%
Hungarian forint <EURHUF=> 285.05 288.89 +1.35% -7.54%
Croatian kuna <EURHRK=> 7.42 7.39 -0.4% -0.74%
Romanian leu <EURRON=> 4.222 4.285 +1.49% -4.92%
Serbian dinar <EURRSD=> 95.762 95.327 -0.45% -6.56%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -18 basis points to 110bps over bmk*
4-yr T-bond CZ4YT=RR -5 basis points to +88bps over bmk*
8-yr T-bond CZ8YT=RR -3 basis points to +100bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -31 basis points to +769bps over bmk*
5-yr T-bond HU5YT=RR -23 basis points to +720bps over bmk*
10-yr T-bond HU10YT=RR -17 basis points to +540bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1724 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 and
Marius Zaharia; editing by Patrick Graham)
