* FX recover losses, cbank bias shift helps zloty
* Polish bonds tad down before switch sale
(Adds details, fixed income)
By Jason Hovet
PRAGUE, Oct 29 (Reuters) - Central Europe's currencies
recovered on Thursday from multi-month lows hit in the previous
session, but stocks slid to keep pressure on a region struggling
with rising budget shortfalls and faltering growth.
The Prague stock exchange <> dropped as much as 5 percent
to a 2-1/2 month low, catching up with a steep regional selloff
on Wednesday when the Czech bourse was closed for a holiday.
Other markets fell around 1 percent. []
Hungary's forint <EURHUF=> gained back 0.2 percent to 274.25
to the euro by 1040 GMT, lifting bonds and unfazed by
unemployment data on Thursday showing the jobless rate rose to a
13-year high. []
Poland's zloty <EURPLN=> was up 0.6 percent after a 1
percent fall in Wednesday. The Czech crown <EURCZK=> also
regained 0.6 percent but was still close to a four-month low.
Currencies have corrected from gains this month, and
analysts see the possibility that a gradual rally that has
lifted the zloty and forint 9 percent since March might be near
an end as a global market recovery has faltered in recent weeks.
"In this environment it is not surprising that the Emerging
Market currencies too are coming under pressure," Commerzbank
analysts said. "However, in their case as well, it is more
likely to be a correction than a trend reversal, although a
correction with long-term consequences."
The crown has shed 4 percent this month worsened by talk of
interest rate cuts by central bank Governor Zdenek Tuma and
Vice-Governor Miroslav Singer, which has impacted markets
although their colleagues have not voiced support and analysts
see rates unchanged next week. []
Differing interest rates are one point that may
differentiate between currencies in the region as markets
correct, with the forint <EURHUF=> and Romania's leu <EURRON=>
also in the firing line given expectations of more rate cuts.
"Specifically a basket of long PLN, NOK (more hawkish
central banks) versus short CZK, HUF, TRY (relatively dovish
central banks) moved about 1.4 percent higher since the S&P
started falling a few days ago," UniCredit strategists said.
BIAS CHANGED
Poland's central bank kept its main interest rate unchanged
at a record low of 3.5 percent on Wednesday.
Governor Slawomir Skrzypek said the day after the central
bank's Monetary Policy Council (MPC) gave a clear signal there
would be no more interest rate cuts until next year, when a new
council is appointed. [] []
Strategists have been most bullish on the zloty, although
they say pressure could stay as the country struggles to rein in
budget gaps and debt while counting on privatisation plans.
The Polish government has conceded it would not meet its
plan of 12 billion zlotys in privatisation revenue this year.
Treasury Minister Aleksander Grad said on Thursday revenue could
exceed 5 billion zlotys in 2009. []
Yields on Polish 5-year bonds rose 4 basis points before a
switch tender. Dealers expected sentiment to weigh on demand.
In Romania, the leu recovered with other currencies after
getting its first jolt in a month on Wednesday. Prolonged
political wrangling to form a new government has pressured the
market, although investors also fear central bank intervention.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.389 26.545 +0.59% +1.38%
Polish zloty <EURPLN=> 4.257 4.281 +0.56% -3.34%
Hungarian forint <EURHUF=> 274.25 274.92 +0.24% -3.9%
Croatian kuna <EURHRK=> 7.225 7.225 0% +1.94%
Romanian leu <EURRON=> 4.306 4.324 +0.42% -6.77%
Serbian dinar <EURRSD=> 93.26 93.183 -0.08% -4.05%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 93bps over bmk*
7-yr T-bond CZ7YT=RR +10 basis points to +112bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +97bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +375bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +292bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +551bps over bmk*
5-yr T-bond HU5YT=RR -7 basis points to +485bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +419bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1141 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus; Writing by Jason Hovet; Editing
by Patrick Graham and Victoria Main)
