(Adds details, fixed income, byline)
By Jason Hovet
PRAGUE, Oct 16 (Reuters) - Hungary's forint jumped on
Thursday, lifted by a European Central Bank deal to boost euro
liquidity in the market that helped stabilise the currency after
heavy falls, but pressure remained in central Europe.
The forint lost more than 7 percent on Wednesday when
concerns over domestic banks' funding abilities intensified,
leading a sell off in the region.
Hungary's central bank (MNB) said it had signed a deal with
the European Central Bank on repurchase transactions which will
allow the MNB to borrow up to 5 billion euros [].
But stock markets still fell on Thursday, around 4 to 6
percent in Prague <> and Budapest <>, and almost 3
percent in Warsaw <> <>
By 0819 GMT, the forint <EURHUF=> was bid at 262.1 to the
euro, up 1.8 percent from Wednesday's domestic close, and last
traded <EURHUF=D2> at 262.3 per euro, off a two-year low of 272
hit in the past week.
Investors have shone an intense light on Hungary's exposure
to foreign credit markets and its higher loan-to-deposit ratio
in recent weeks, causing the currency to swing widely.
Hungary's government and central bank, as well as some of
its top lenders, have struggled to assure markets that its
financial system is well capitalised, but its efforts have not
stopped a steep selloff in forint-based assets.
"This (deal) may slightly improve the situation but perhaps
it will not be enough to save us given the magnitude of troubles
we are faced with," said Gergely Suppan at Takarekbank.
Standard & Poor's on Wednesday put the credit ratings of
Hungary and Ukraine on review for a possible downgrade due to
deteriorating financial sector conditions [].
However, analysts have made clear that while Hungary is more
exposed than the Poles, Czechs and Slovaks, it is still seen as
more stable than Ukraine, Romania, or Bulgaria and is a
different case to Iceland, which is near economic collapse.
Poland's zloty <EURPLN=> fell 0.6 percent to 3.535 against
the euro, the Czech crown <EURCZK=> edged 0.2 percent down to
24.755 per euro, while Romania's leu <EURRON=> inched up 0.2
percent to 3.795 per euro.
"The situation in Hungary has settled a little (following
the ECB deal)," a Prague-based trader said.
"But the situation is very unclear and very nervous, and I
think volatility will definitely not disappear from the market."
Among other currencies, Serbia's dinar <EURRSD=> fell and
Croatia's kuna <EURHRK=> nudged lower as both currencies have
been hit by heavy demand for euros.
BOND MARKETS NEAR STANDSTILL
Central European currencies and stocks fell sharply on
Wednesday. Wall Street and Asian stocks tumbled overnight, and
European shares soon followed to put pressure on the region.
"With such decisive worsening of sentiment around the globe,
emerging markets' currencies most probably will not be very
popular among investors," analysts from Bank BPH in Warsaw wrote
in a note.
Central European government bond markets remained at near
standstill as buyers stayed away. In normally more liquid
Poland, yields rose tracking losses for the financial sector.
"There isn't really much of a market, there's a lack of
liquidity," said Maciej Slomka, head dealer at Pekao bank in
Warsaw.
Regional central banks have introduced new measures at
restoring liquidity, but Czech market makers have mostly stopped
quoting, and dealers worried that a flood of sellers could come
to the market as Hungary's market is mainly shut.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.755 24.703 -0.21% +6.57%
Polish zloty <EURPLN=> 3.535 3.513 -0.63% +1.82%
Hungarian forint <EURHUF=> 262.100 266.950 +1.82% -3.66%
Croatian kuna <EURHRK=> 7.160 7.155 -0.07% +2.27%
Romanian leu <EURRON=> 3.795 3.802 +0.18% -6.00%
Serbian dinar <EURRSD=> 82.91 82.678 -0.28% -5.27%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +26 basis points to 54bps over bmk*
5-yr T-bond CZ5YT=RR +7 basis points to +40bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +47bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +35 basis points to +338bps over bmk*
5-yr T-bond PL5YT=RR +25 basis points to +280bps over bmk*
10-yr T-bond PL10YT=RR +24 basis points to +235bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1019 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Mike Peacock)
