* Debt sale, GM investment lift forint
* Caution ahead of Fed, but positioning for gains
* Romanian politics may pressure leu further, dealers say
(Updates quotes, prices, recasts lede)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Sept 21 (Reuters) - Demand for Hungarian
treasury bills and news of a General Motors investment lifted
the forint to a four-week high on Tuesday as it outpaced its
emerging European peers.
Investors in central Europe were cautious ahead of a U.S.
Federal Reserve meeting on Tuesday, with the Fed expected to
debate the need for further quantitative easing to boost the
U.S. economy but hold off on action. []
Central European currencies are moving back onto firmer
ground after a weak patch in the past month, with the Czech
crown and Polish zloty best positioned to take advantage of
export-driven economic recovery this year, analysts say.
Hungary's lagging economy got a boost on Tuesday with news
that General Motors (GM) [] would invest 500 million euros
($655 million) to expand capacity at its Opel factory in the
country. []
The Hungarian economy contracted 6.3 percent last year and
is expected to grow by 0.9 percent this year -- less than half
the growth expected in the Czech Republic and Poland.
The forint <EURHUF=> added 0.35 percent by 1403 GMT to bid
below the psychologically important 280 to the euro level for
the first time since the middle of August.
The currency was also boosted by a bigger-than-expected sale
of three-month Hungarian treasury bills where the yield dropped
and demand was three times the offer. []
"It was high time we test levels south of (EUR/HUF) 280," a
Budapest-based dealer said. "The Fed's decision will be a key
watershed. That's what determines whether we stay at these
levels or not."
The forint is still down 5.3 percent since April 11, the day
of the first round of a general election that swept the
centre-right Fidesz party to power.
CAUTIOUS OPTIMISM
The zloty <EURPLN=> and crown <EURCZK=> dipped around
0.1-0.2 percent ahead of the Fed meeting, while the Romanian leu
<EURRON=> rose 0.1 percent. The Warsaw bourse <> rose 1
percent to a five-month high, leading stock market gains across
the region.
Investors are cautiously optimistic that the region is
recovering although there are some questions over whether budget
cuts will hurt the recovery.
"The market looks positioned for more of the same gradual
and cautious optimism," RBC strategist Nigel Rendell said.
"Currencies have generally held their own today. There has
been interest in Hungary with the extra investment."
Dealers said the Romanian leu could be vulnerable after the
opposition party said it planned to file a no-confidence motion
against the government next month. []
Recession-hit Romania must implement austerity measures to
keep an IMF-led aid package on track, but the steps have made
the centrist coalition government deeply unpopular, raising the
chances of its collapse.
In Prague, around 40,000 nurses, police officers and clerks
marched on Tuesday to protest against a plan to cut public
sector wages. []
Still, analysts say the region's governments are unlikely to
be deterred from cutting their budgets, analysts say.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.668 24.619 -0.2% +6.69%
Polish zloty <EURPLN=> 3.944 3.941 -0.08% +4.06%
Hungarian forint <EURHUF=> 279.74 280.73 +0.35% -3.36%
Croatian kuna <EURHRK=> 7.284 7.281 -0.04% +0.35%
Romanian leu <EURRON=> 4.255 4.261 +0.14% -0.41%
Serbian dinar <EURRSD=> 105.227 105.32 +0.09% -8.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +91bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +96bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +364bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +581bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +538bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +448bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1604 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Dagmara Leszkowicz;
Editing by Hugh Lawson and Susan Fenton)
