* Forint falls over week for first time in 2011
* Stocks mostly climb to support FX
* Czech bonds gain as markets see dovish cbank
(Updates throughout)
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, Feb 11 (Reuters) - The Hungarian forint
rebounded on Friday with a rising euro but was set for its first
weekly loss of 2011 amid indications that optimism over
anticipated Hungarian spending cuts may have been overdone.
Central European currencies climbed at the start of the year
but have struggled in February as doubts grew over Hungary's
fiscal outlook and the scale and pace of monetary policy
tightening priced in in Poland and the Czech Republic.
The region's equity markets also took a breather after
recent falls but investors remained uneasy against a backdrop of
escalating tensions in Egypt and recent weakness in the region's
reference currency, the euro. []
By 1619 GMT, the forint <EURHUF=> rose 0.5 percent to bid at
270.62 to the euro. The Polish zloty <EURPLN=> inched up 0.15
percent and the Czech crown <EURCZK=> was steady. The Romanian
leu <EURRON=> added 0.2 percent.
The forint has risen 2.4 percent so far in 2011 but is down
1.2 percent since Monday. Some strategists have started
recommending buying the zloty, backed by its stronger economy,
against the forint on the basis that budget steps to be
announced in late February will disappoint. []
"There is speculation (over the package) without any
concrete facts," a Budapest dealer said. "We have no clear
picture, it is mixed."
Hungarian government bonds continued to retreat. Foreigners
have boosted their Hungarian bond holdings this year but are
still underweight relative to emerging market peers, traders
said.
The full bond yield curve rose above the 7 percent mark and
the papers have given up near half of the gains posted in the
first weeks of 2011.
Some more reform details may emerge in a speech Prime
Minister Viktor Orban is expected to deliver in parliament on
Monday, though the government is not expected to table the
reforms until close to the end of this month.
"They (the government) had better come out with something
convincing," a foreign exchange dealer said. "If they
disappoint, the forint will continue its slide for sure."
INVESTORS MULL INTEREST RATE TRENDS
Polish bonds firmed slightly in the past two days while the
zloty weakened as comments by a Polish central banker cast doubt
on expectations of a 1 percentage point increase in interest
rates over the next three quarters. []
Analysts differ over the likely timing and degree of the
hikes, but two bankers who previously voted for rises in rates
have said the market is pricing too much in.
"In the near term there are no factors that could strengthen
the zloty," a trader at a Warsaw bank said. "Interest rates
(could be supportive) but these (rate rises) are not certain."
Czech yields fell by up to 10 basis points in thin trade,
after central bank minutes revealed a split board, adding to
inflation data this week that was lower than expected to argue
against the chances of aggressive tightening. []
"Given the fact that hawk (Robert) Holman will be replaced
by a new member, (Lubomir) Lizal, it could decrease the
probability of central bank hikes and thus we see ... minutes as
slightly dovish," Komercni Banka traders said in a note.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.193 24.182 -0.05% +3.34%
Polish zloty <EURPLN=> 3.911 3.917 +0.15% +1.2%
Hungarian forint <EURHUF=> 270.62 272.05 +0.53% +2.72%
Croatian kuna <EURHRK=> 7.409 7.408 -0.01% -0.39%
Romanian leu <EURRON=> 4.254 4.262 +0.19% -0.49%
Serbian dinar <EURRSD=> 103.12 103.2 +0.08% +2.72%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -15 basis points to 26bps over bmk*
7-yr T-bond CZ7YT=RR -17 basis points to +62bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +75bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +526bps over bmk*
5-yr T-bond HU5YT=RR +8 basis points to +486bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +429bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1621 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai/Sandor
Peto; Editing by Patrick Graham)
