* Poland keeps key rate unchanged at 3.5 pct, as expected
* Polish Nov. retail sales beat forecast, recovery seen
* Romania eyes confidence vote in new government
* Regional currencies stronger, bond yields flat
(Recasts with Polish rate decision, updates market)
By Marton Dunai
BUDAPEST, Dec 23 (Reuters) - Emerging European currencies
strengthened on Wednesday as the Polish central bank decided to
hold rates at their record low of 3.5 percent, as expected,
giving a mild boost to the zloty.
"The MPC has been preparing for some time for the end of its
term," said Grzegorz Ogonek, economist at ING Bank in Warsaw.
"The conviction has prevailed since the autumn that nothing will
change and there were no reasons to surprise the market."
By 1141 GMT, the zloty <EURPLN=> added 0.4 percent versus
the euro, followed by the Hungarian forint <EURHUF=> at 0.3
percent. The Czech crown <EURCZK=>, the region's top performer
in 2009, was flat.
Analysts indicated that they expected Poland's key rate to
remain on hold for most of 2010 as inflation pressures will ease
but the central bank will be concerned with sustained growth.
Signalling a steadying recovery, Poles spent 6.3 percent
more at stores in November than a year ago, prompting analysts
to embolden fourth-quarter GDP forecasts. []
The forint has firmed in illiquid trading this week after
the central bank cut rates by a smaller than expected 25 basis
points on Monday, to 6.25 percent.
Gains were helped by low liquidity as most investors have
closed positions ahead of the year-end.
"Activity is low," a Warsaw-based dealer said. "The zloty
keeps strong. Money sent to Poland for Christmas from abroad is
helping... I think the zloty will be in a range of 4.1650-4.1850
against the euro."
Czech market watchers also expect subdued trading and
current levels holding out after recent losses.
"We do not expect Tuesday losses to erase quickly and the
crown may remain defensive during the holidays," bank CSOB said
in a morning note.
The Czech central bank will release at 1330 GMT minutes from
the Dec. 16 interest rate setting meeting where policymakers
unexpectedly cut the main rate <CZCBIR=ECI> to a record low of 1
percent.
ROMANIAN GOVT SEEN PASSING CONFIDENCE VOTE
The Romanian leu <EURRON=> added 0.6 percent ahead of a
confidence vote in parliament for the cabinet proposed by Prime
Minister designate Emil Boc. The centrist coalition government
is seen winning the vote.
"(The market) doesn't expect the cabinet to fall," one
dealer said. "I expect the leu to edge up, in tandem with the
region."
Bond markets were also quiet regionwide and yields were
marginally lower everywhere, dealers said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.336 26.349 +0.05% +1.58%
Polish zloty <EURPLN=> 4.162 4.18 +0.43% -1.13%
Hungarian forint <EURHUF=> 273.64 274.54 +0.33% -3.69%
Croatian kuna <EURHRK=> 7.28 7.279 -0.01% +1.17%
Romanian leu <EURRON=> 4.192 4.217 +0.6% -4.24%
Serbian dinar <EURRSD=> 96.32 96.27 -0.05% -7.1%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to +76bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +85bps over bmk*
10-yr T-bond CZ10YT=RR 0 basis points to +73bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +392bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +360bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +299bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +585bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +527bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +467bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1241 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Marton Dunai, editing by Mike Peacock/Ruth
Pitchford)
