* Zloty gains as CPI higher than forecast
* Other regional FX also stronger on improving sentiment
* Investors await details of Hungary's deficit cuts
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Oct 14 (Reuters) - Poland's zloty strengthened
through key levels against the euro overnight, boosted by
privatisation inflows and as higher than forecast inflation fed
expectations of early rate hikes.
Other currencies in the region were also stronger amid
continuing expectations that the U.S. Federal Reserve will
continue to pump cash into the market to support a still-anaemic
economic recovery.
By 0925 GMT the zloty <EURPLN=> was 0.5 percent stronger at
around 3.89 to the euro, slightly off earlier highs, while
Hungary's forint <EURHUF=> and the Czech crown <EURCZK=> each
added 0.2 percent and Romania's leu <EURRON=> rose 0.1 percent.
"Yesterday's inflation in Poland boosted expectations for
rate hikes and we also had this privatisation flow," said Jakub
Wiraszka, a dealer at BRE bank in Warsaw. "But bullish sentiment
is everywhere now."
Dealers said the zloty was likely to appreciate further,
though the level of around 3.85 -- at which the central bank
intervened at the start of April to weaken the currency -- may
act as a support.
Polish inflation unexpectedly accelerated to the central
bank's 2.5 percent target rate in September, prompting Monetary
Policy Council member Andrzej Bratkowski to urge a quick rate
hike. []
Additionally, last week Warsaw sold 10 percent of the
country's largest utility PGE <PGEP.WA> in the open market and
sources close to the transaction said about 30 percent went to
foreign investors, who needed to convert euros into zlotys,
further boosting the Polish unit.
ROOM TO APPRECIATE
The zloty and the crown have been the best performing
currencies in the region, rising more than 5 percent and 7
percent respectively since the start of the year.
The forint and the leu are weaker compared to levels seen in
January, though many in the market expect the Hungarian currency
to appreciate further as investors become more comfortable with
the political situation and factor in government's determination
to meet tough budget targets.
The head of emerging market debt at JPMorgan Asset
Management told the Reuters Central European Summit on Wednesday
the region was still underbought and that since the economic and
political situation is seen stabilising, the company has shifted
its portfolio back to the region. []
Also on Wednesday, Hungary's Prime Minister Viktor Orban
outlined long-awaited details of how the cabinet plans to cut
the budget deficit to the EU's 3 percent of GDP ceiling by next
year, with the full economic plan to be sent to parliament on
Monday.
Details of the plan are seen as key for Budapest to win back
the markets' trust and avoid having to go back to the IMF for
help after walking away from talks this summer, though so far
the market seems content with the government's recent comments,
"Overall, we believe that Hungary can now meet its fiscal
deficit targets for this year and next even with our assumptions
for more sluggish growth forecasts," Peter Attard Montalto, an
economist at Nomura, wrote in a note.
Traders said, however, long-term bonds may weaken on the
fiscal plan, and appetite for such paper may be cut next year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.402 24.457 +0.23% +7.85%
Polish zloty <EURPLN=> 3.895 3.914 +0.49% +5.37%
Hungarian forint <EURHUF=> 271.95 272.55 +0.22% -0.59%
Croatian kuna <EURHRK=> 7.325 7.33 +0.07% -0.22%
Romanian leu <EURRON=> 4.271 4.276 +0.12% -0.79%
Serbian dinar <EURRSD=> 105.89 106.14 +0.24% -9.45%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to 94bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +97bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +106bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +390bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +365bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +8 basis points to +550bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +517bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +452bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1125 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 Toby Chopra, John Stonestreet)
