(Adds details, dealers quotes)
By Marius Zaharia
BUCHAREST, Oct 2 (Reuters) - Central European currencies
slid on Thursday, led by a sharp decline in the Romanian leu,
after the U.S. Senate's approval of a plan to ease the credit
crunch failed to lift investor sentiment in the region.
Emerging assets have been hit by the freezing up of global
credit markets, which has prompted traders and investors to sell
their holdings of such assets and hoard cash.
The leu <EURRON=> fell 2.3 percent to an eight-month low of
3.8294 versus the euro by 1503 GMT. Dealers said it was quickly
heading towards 3.8385, which if it passes, would touch a
three-and-a-half year low.
A dealer with a foreign bank in Bucharest said the leu had
suffered more than its regional peers due to a need by firms to
buy euros that was not offset by normal incoming market flows.
"All emerging markets are being hit by a rebounding dollar,"
the dealer said.
"The (Romanian) market is smaller, and because retailers
need hard currency for imports ahead of the winter season and
Romania's aggregate demand is higher than elsewhere, this is
felt (here) more than in the rest of the region."
Poland's zloty <EURPLN=> lost 0.82 percent to 3.425 per
euro, pushed down by comments from Polish central bank voting
member Jan Czekaj, who said earlier on Thursday that there may
not be any need for more rate hikes at least for a while.
The move undercut some gains from last month that came after
the Polish government announced a plan to adopt the euro in
2012, leading to expectations of tighter monetary policy.
"The MPC member's comments eased expectations on a further
hikes in Poland," said a dealer at a Warsaw-based bank.
The Czech crown <EURCZK=> fell 0.9 percent to 24.755 per
euro and the Hungarian forint <EURHUF=> lost 0.6 percent to
242.79 per euro.
Hungarian bond yields were up slightly, in line with the
forint easing while Polish bond prices rose on Thursday as
analysts said comments from the head of the European Central
Bank opened the door to lower interest rates in the euro zone.
In other trade, the Croatian kuna <EURHRK=> was down 0.2
percent to 7.108 per euro, while the Serbian dinar <EURRSD=> was
down 0.15 percent to 76.748 against the euro.
Regional currencies have retreated since mid-September when
U.S. investment bank Lehman Brothers filed for bankruptcy
protection, starting a new phase in the year-old credit crisis.
Late on Wednesday, the U.S. Senate passed a bank rescue
deal, but investors looked nervously to a further vote expected
in the lower house, which unexpectedly on Monday rejected the
plan to buy up bad debts.
Central European money markets have been little affected by
the turmoil, and government officials sought this week to
reassure markets their countries were insulated from the crisis.
However, the region's economies have also been hit by
evidence they are slowing due to weaker euro zone demand.
The Czechs were the first to reverse monetary tightening in
August, cutting interest rates a quarter percentage point. On
Thursday, Czech officials said the economy will slow more than
previously expected [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
#VALUE!
Polish zloty <EURPLN=> 3.42 3.397 -0.68% +5.01%
Hungarian forint <EURHUF=> 244.57 242.78 -0.74% +3.27%
Croatian kuna <EURHRK=> 7.11 7.1 -0.14% +2.96%
Romanian leu <EURRON=> 3.824 3.742 -2.19% -6.81%
Serbian dinar <EURRSD=> 76.758 76.632 -0.16% +2.54%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -8 basis points to 31bps over bmk*
5-yr T-bond CZ5YT=RR -12 basis points to +20bps over bmk*
10-yr T-bond CZ9YT=RR -10 basis points to +31bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +-6 basis points to +287bps over bmk*
5-yr T-bond PL5YT=RR 2 basis points to +232bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +189bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +613bps over bmk*
5-yr T-bond HU5YT=RR +8 basis points to +561bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +419bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1806 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
(Reporting by Reuters bureaus, writing by Marius Zaharia,
editing by Toby Chopra)
