* Emerging FX down against weaker euro
* Forint retreats, bond yields jump on fiscal worries
* Romania govt to face no confidence vote
(Releads, adds fixed income, detail)
By Dagmara Leszkowicz and Luiza Ilie
WARSAW/BUCHAREST, March 8 (Reuters) - Emerging European
currencies slid against a weaker euro on Tuesday, with Hungary's
forint reversing early gains on comments by a new central banker
as deficit data revived concerns about fiscal sustainability.
Czech <>, Hungarian <> and Polish <> stocks also
edged lower despite a more stable oil price that helped lift
stocks in emerging markets most exposed to Middle East turmoil.
In Budapest, the forint <EURHUF=> was boosted early on
Tuesday after Ferenc Gerhardt, one of the two economists
appointed by the ruling Fidesz party on the country's Monetary
Policy Council said interest rates should stay on hold for now.
His comments cast doubt on market expectations that
government nominees would give the council a looser policy bias.
Two further appointments are pending. []
"These appointments should not lead to any negative market
reactions and we still believe the change in the MPC
should not lead to any large changes in monetary policy,"
Citibank said in a research note.
But the forint came under pressure after Monday data
revealed Hungary's budget deficit surged to 81.4 percent of its
2011 target in February. []
Officials said the full-year target of 2.94 percent of gross
domestic product was still achievable, with proceeds from the
sale of private pension assets and crisis taxes due to show up
in the budget in the second half, but analysts said the data
would make markets nervous.
"None of this is verifiable until detailed figures are
released later in March," analysts at RBC wrote. "Nevertheless,
these data could cause some nerves in the short term."
By 1405 GMT, the forint was down 0.4 percent on the day
versus the euro. The Czech crown was 0.3 percent weaker while
the Polish zloty <EURPLN=> had fallen 0.4 percent.
The bond market was weaker across the region with Hungary's
bond yields rising 12-17 basis points, while Polish paper fell
ahead of a two-year bond auction on Wednesday.
Meanwhile, Danske Bank recommended to investors on Tuesday
that they play on an expected flattening of Hungary's government
bond yield curve by paying two-year and receiving 10-year
interest rate swaps (IRS). []
RATES VS GROWTH
In Poland, a member of the central bank's Monetary Policy
Council told daily Nasz Dziennik the MPC would hurt economic
growth and the labour market if it raised rates, and would still
fail to curb externally driven inflation. []
Newly published voting records from the last four months of
2010 showed policymakers in Poland were split on whether to
increase rates. Central bank governor Marek Belka used his vote
to block motions for a rate hike each time.
Poland raised rates in January by 25 basis points after
Belka signalled concern over inflation.
Polish 9x12 forward rate agreements <PLFRA> indicate four
more interest rate increases are expected by the end of the
year, each by a quarter of a percentage point.
Elsewhere in the region, the Romanian leu <EURRON=> was 0.2
percent up versus the euro at 4.1870, a nine-month high. Traders
have said they suspected indirect central bank intervention to
support the leu to help ease inflation late last month.
Markets will be keenly watching inflation data this week in
the Czech Republic, Hungary and Romania.
Romania's government approved a new IMF-backed labour code
on Tuesday but faces a no confidence motion over the change in
parliament next week. It is widely expected to survive the vote.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.318 24.171 -0.6% +2.8%
Polish zloty <EURPLN=> 3.98 3.97 -0.25% -0.55%
Hungarian forint <EURHUF=> 272.9 272 -0.33% +1.86%
Croatian kuna <EURHRK=> 7.402 7.405 +0.04% -0.3%
Romanian leu <EURRON=> 4.188 4.194 +0.14% +1.07%
Serbian dinar <EURRSD=> 103.51 103.32 -0.18% +2.34%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 11bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +73bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +79bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +336bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +302bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +495bps over bmk*
5-yr T-bond HU5YT=RR +17 basis points to +474bps over bmk*
10-yr T-bond HU10YT=RR +12 basis points to +412bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1533 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Editing by Catherine Evans)
