* Romania's c.bank makes surprise cut, leu shakes off
* FX trims early gains after euro slips
* Serb dealers report c.bank intervention
(Adds Hungary budget)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Jan 5 (Reuters) - The Romanian leu jumped to
a three-month high on Tuesday, with dealers citing sales of euro
reserves by local banks optimistic over their loan portfolios
that offset a surprise half-percentage point interest rate cut.
Romania's central bank unexpectedly cut its benchmark rate
to 7.5 percent, with the move raising concern over the return of
weakening pressure. However, the leu shook it off and rose on
some banks' need for local capital. []
Several dealers said local banks were moving to reduce some
of the hard currency provisions set aside last year, buoyed by a
generally more stable leu, and the fading of a funding and
political crisis in the European Union newcomer.
"Some banks are selling massive sums of euros to get money,
from (last year's) provisioning for bad loans, for planned
capital hikes because of losses incurred last year," said a
Bucharest dealer.
Dealers said there were also stop losses recorded after the
unit firmed beyond a 4.19 per euro level. The leu <EURRON=> bid
up 0.9 percent at 4.178 to the euro by 1624 GMT.
Most analysts had expected the Romanian bank to hold fire on
rates until February, when expected parliamentary approval of a
2010 budget bill would help secure the next tranche in its
IMF-led aid package. [] []
"We believe this decision could prove counter-productive
and, even though we acknowledge that economic crisis in Romania
is still very deep, there is not room for monetary easing in the
present political and financial environment," said Lars
Christensen of Danske Bank in Copenhagen.
Elsewhere, the Serb central bank sold 17 million euros in
the interbank forex market on Tuesday to stem dinar <EURRSD=>
declines after banks reported deals nearing all-time lows at
97.30/euro, dealers said. []
Other emerging Europe's currencies were a touch down, buoyed
by better manufacturing sentiment to start the year after giving
up early gains when the dollar recover against the euro, the
region's reference currency. []
The Polish zloty <EURPLN=> was 0.2 percent down against the
euro. Hungary's forint <EURHUF=> fell some 0.2 percent against
the euro while the Czech crown <EURCZK=> was off 0.1 percent.
BUDGETS AHEAD
Analysts said news from Monday that the Czech 2009 state
budget deficit was almost five times higher than plan weighed on
the crown, which has lost over 2 percent in the past month.
Ceska Sporitelna recommended on Monday that investors go
long crown as temporary adverse factors fade and a trade surplus
adds supports along with lower dividend outflows.[]
Budget deficits, though, remain a risk in the region as it
grapples with economic decline and many face election years.
In Hungary, where an IMF-led emergency aid has imposed tough
fiscal conditions, a December surplus helped cut the full-year
deficit to below the target. Meeting the target was a condition
with the IMF package. [] []
Poland also expects its 2009 budget deficit to come in below
a revised target of 27 billion zlotys but this could double in
2010. The overall budget gap could hit 7 percent of GDP.
Poland's finance ministry on Monday gave details of the debt
supply for the first quarter. The news knocked bonds, which
reversed their losses on Tuesday. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.26 26.231 -0.11% +0.22%
Polish zloty <EURPLN=> 4.09 4.082 -0.2% +0.34%
Hungarian forint <EURHUF=> 268.91 268.35 -0.21% +0.54%
Croatian kuna <EURHRK=> 7.288 7.291 +0.04% +0.29%
Romanian leu <EURRON=> 4.178 4.214 +0.86% +1.42%
Serbian dinar <EURRSD=> 96.88 96.43 -0.46% -1.03%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -32 basis points to 70bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +82bps over bmk*
10-yr T-bond CZ10YT=RR +6 basis points to +69bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +568bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +507bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +445bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1725 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus; writing by Dagmara
Leszkowicz/Jason Hovet; editing by Patrick Graham)
