* Dealers say Romania cbank intervenes to weaken leu
* Short-term yields dip on dovish Czech cbank comments
* Markets eye other CEE cbank meetings next week
* Little immediate impact seen from Greek safety net move
(Updates throughout)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, March 26 (Reuters) - The Romanian central
bank knocked the leu off 14-month peaks on Friday, with dealers
citing intervention, and other central European assets lost on
profit-taking before a round of central bank meetings next week.
Czech short-term bonds bucked the trend. Yields on the short
end fell over 10 basis points and the 2-year interest rate swap
was down 17 basis points from Wednesday as investors re-factor
in the possibility of a final rate cut before monetary
tightening later this year.
Czech central bank Governor Zdenek Tuma surprised markets on
Thursday by saying two board members voted for a cut and that
further easing could not be ruled out after the Czech bank left
rates on hold. Analysts expect a hike as the next move.
[]
The meeting kicked off a round of rates meetings, with
Romanian and Hungarian rates expected to be cut on Monday.
Currency strength is also likely to be a talking point after 2-6
percent gains in the region's currencies so far this year.
The Romanian leu <EURRON=> lost 0.3 percent to bid at 4.067
to the euro by 1530 GMT. It joined this week the Hungarian
forint and Polish zloty at highs last seen at the turn of
2008/2009.
Dealers said the central bank bought euros through local
banks to prevent the unit from firming towards levels that could
hurt exporters and hamper economic recovery. []
"While it was inevitable for the central bank to step in ...
we expected interest to buy EUR/RON around 4.00, but it seems
that the central bank drew a line in the sand at around 4.05,"
4CAST analyst Piotr Matys said.
The central bank declined comment.
RATES OUTLOOK
The forint <EURHUF=> and zloty <EURPLN=> led losses, falling
0.7 and 0.6 percent, as a rally in the region starts to
splutter.
Dealers saw little impact on the region's currencies from
Thursday's decision by euro zone leaders to provide a joint
European-IMF safety net for debt-laden Greece. []
Central European markets have benefitted from investors
shifting positions to the region and its better growth prospects
and debt positions than euro zone peripherals like Greece.
However, the market risk from Greece never fully disappeared.
"Buying the zloty was the favourite trade at the end of last
year," said Calyon FX strategist Stuart Bennett.
"The appreciation gained momentum since February. At the
moment, the appreciation of the Polish currency has stopped
because of Greece's problems and the central bank talking about
interventions didn't help."
Polish and Romanian policymakers have grown concerned over
the strong currencies' impact on economic recovery.
Analysts expect Polish rates will stay unchanged at 3.5
percent at a meeting ending on Wednesday. [] Polls
show the key rate at 4 percent at the end of 2010 but conviction
seems to be waning over the two small hikes that implies.
Analysts also expect Czech rates to end higher than the
current record low of 1 percent. But markets were thrown off by
Thursday's comments. Raiffeisenbank changed its recommendation
for bonds with up to two year maturities to neutral from sell.
Romania is expected to cut rates by 50 basis points to a
record low of 6.5 percent, taking advantage of a strengthening
leu []. Hungary is seen easing by 25 basis points
to 5.5 percent. [] Hungarian bond yields rose
slightly on Friday from multi-year lows.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.422 25.315 -0.42% +3.52%
Polish zloty <EURPLN=> 3.899 3.876 -0.59% +5.26%
Hungarian forint <EURHUF=> 265.31 263.42 -0.71% +1.9%
Croatian kuna <EURHRK=> 7.26 7.26 0% +0.68%
Romanian leu <EURRON=> 4.067 4.053 -0.34% +4.19%
Serbian dinar <EURRSD=> 99.649 99.763 +0.11% -3.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -17 basis points to 66bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +97bps over bmk*
10-yr T-bond CZ10YT=RR 0 basis points to +90bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +374bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +297bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +238bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +469bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +403bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +373bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1632 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia and
Jason Hovet; Editing by Susan Fenton and Toby Chopra)
