* FX weaken, euro zone periphery worries loom
* Czech c.bank left rates unchanged, crown unmoved
(Adds Czech rate decision, fresh prices)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, Feb 4 (Reuters) - Central Europe's
currencies fell on Thursday with Poland's zloty leading the
losses as global sentiment soured, pushing the euro down against
the dollar.
The regions' units rose significantly at the start of the
week, the zloty breaching a psychological level of 4.0 to the
euro on Monday, but began to fall back as risk aversion
increased amid concern that euro zone member Greece's debt woes
were affecting sentiment towards Portugal and Spain.
"Spreads of the eurozone peripheries against German bunds
are widening and this affects Poland's assets," said Lukasz
Wojtkowiak, FX strategist at Millennium Bank.
In the Czech Republic the central bank left interest rates
unchanged at an all-time low of 1.0 percent, in line with
analysts' expectations, confirming that an 18-month easing cycle
was over. []
Markets have priced in three quarter-point interest rate
hikes this year and dealers said the central bank governor's
comments seemed to confirm this view.
"From my point of view, the comments were a bit more hawkish
than I expected," a Prague fixed income dealer said. "But maybe
the comments just confirmed the market standing."
Bank governor Zdenek Tuma told a news conference after the
announcement that interest rates would tend to move upwards,
probably in the second half of the year. []
By 1320 GMT the zloty <EURPLN=> was 1.8 percent lower
against the euro, while the crown <EURCZK=> fell 0.6 percent,
trading at 26.215.
At the same time the Hungarian forint <EURHUF=> and the
Romanian leu <EURRON=> were down 1.0 and 0.8 percent
respectively.
Analysts polled by Reuters expect the currencies to gain
over the next 12 months, supported by a global and regional
economic recovery. []
The bond market was also weaker and Hungarian and Polish
bonds ticked lower in line with the currencies. Romania sold 340
million lei in five-year treasury bonds earlier in the day.
LARGER CORRECTION?
Traders said a further fall in risk appetite could trigger a
larger correction in the region after the recent rally that sent
the zloty and the leu to 13-month highs.
"We were quite surprised how easily the pair came back above
4.00 EUR/PLN," KBC said in a note. "That puts into question our
recent conclusion about a final break through that barrier.
"If we do not see the comeback below 4.00 EUR/PLN by the end
of the week, the short-term perspectives for the zloty can
deteriorate pretty fast as many market players are long in
zlotys."
Some analysts say the region looks like a safer bet than
some euro zone states, as countries like Hungary and Poland
began a fiscal tightening process before Greece and Portugal.
Standard & Poor's improved the ratings outlook of Lithuania
to stable from negative this week. It said Romania could also
see its credit rating outlook improved to stable if it continues
to implement IMF-prescribed reforms in the coming months.
[]
"The news from S&P is slightly positive ... but a strong
dollar limits market reaction," one dealer in Bucharest said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.215 26.055 -0.61% +0.39%
Polish zloty <EURPLN=> 4.078 4.003 -1.84% +0.64%
Hungarian forint <EURHUF=> 273.7 271.02 -0.98% -1.22%
Croatian kuna <EURHRK=> 7.315 7.314 -0.01% -0.08%
Romanian leu <EURRON=> 4.136 4.103 -0.8% +2.45%
Serbian dinar <EURRSD=> 98.63 98.42 -0.21% -2.79%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +145bps over bmk*
10-yr T-bond CZ10YT=RR +3 basis points to +133bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR +9 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +9 basis points to +554bps over bmk*
5-yr T-bond HU5YT=RR +9 basis points to +506bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +458bps 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 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia and
Dagmara Leszkowicz; Editing by Tim Pearce)
