* Hungary aid deal news adds boost to market
* Forint off lows vs franc, other FX up after ECB tender
* Zloty supported by Tauron stock debut
* Romania cbank holds rates, Poles seen steady also
(Updates with Romania cbank, ECB tender)
By Jason Hovet
PRAGUE, June 30 (Reuters) - The forint rebounded from record
lows against the Swiss franc on Wednesday on news Hungary would
seek a new standby IMF deal, while the leu recovered versus the
euro on expectations Romania would meet its aid conditions.
The Hungarian news gave a short-lived boost to central
European currencies against the region's benchmark, the euro, in
early trade but the region gained again later after a European
Central Bank liquidity tender relieved banking concerns.
[]
Romania's leu rose 0.6 percent versus the euro by 1034 GMT,
cutting its region-leading loss for June to 4.3 percent.
Central European governments have struggled to convince
investors they can maintain fiscal plans, with economic
recoveries fragile and debt troubles plaguing the euro zone.
The International Monetary Fund gave a strong signal on
Tuesday that it was set to release further aid for Romania,
easing nerves the deal could be derailed after a court decision
last week rejected part of the government's cost cutting plans.
The Romanian central bank likely stopped its rate easing
cycle on Wednesday, holding the main interest rate at 6.25
percent as expected, after the leu weakened sharply when the
government hiked the value added tax by five percentage points
to 24 percent to meet IMF aid requirements. []
"The decision is what was supposed to happen given political
instability and the risks to the inflation outlook," said
Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank.
"Looking forward, I believe the central bank will wait to
see to what extent the VAT hike reflects in prices and based on
that we might see either rates on hold at the current level or
even hikes." []
The leu <EURRON=> bid at 4.363, off a record low of 4.39 to
the euro but down from morning highs. The Czech crown <EURCZK=>,
which has held steady this month, inched up 0.04 percent.
The forint gained 0.8 percent against the euro. Bond yields
were flat. The currency bid at around 214.80 versus the franc
<CHFHUF=>, off session lows of 218 but down about 15 percent
against the Swissie since May.
The safe-haven franc has gained since the Swiss National
Bank this month backed off a pledge to intervene in FX markets.
This has hurt Hungarians holding foreign exchange loans in
francs. Total loans in francs equal about 16 percent of GDP.
The country will extend its existing IMF financing deal by
two months until the end of 2010, Hungarian PM aide Gyorgy
Szapary told www.fn.hu on Wednesday.
He added that while the Hungarian government was not
planning to draw upon a new, standby loan, a precautionary deal
could boost markets' confidence. []
WEAK DEBUT
Poland's zloty <EURPLN=> rose 0.4 percent from Tuesday's
domestic close, supported by the debut of utility Tauron in
Warsaw -- Europe's fourth largest public offering this year.
The utility's shares lost almost 1 percent, but Warsaw
blue-chip stocks <> gained 0.3 percent. []
Poland's central bank is expected to leave borrowing costs
flat at an all-time low of 3.5 percent on Wednesday. Markets
will mainly be eyeing comments from new Governor Marek Belka.
Poland, along with the Czech Republic, are seen among the
first to tighten rates, either later in 2010 or early 2011.
Czech markets welcomed a deal between the incoming
three-party, centre-right coalition government overnight that
divided up the key cabinet posts, including the appointment of
austerity advocate Miroslav Kalousek as finance minister.
Longer-dated bond yields fell 7-9 basis points on Wednesday,
with the benchmark 2019 <CZ1002471=> yield at a six-week low.
European markets are also focussed on the expiry of a
12-month ECB operation on Thursday. []
Investors fear Thursday's expiry could leave some banks
facing a liquidity shortfall.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.739 25.749 +0.04% +2.25%
Polish zloty <EURPLN=> 4.128 4.144 +0.39% -0.58%
Hungarian forint <EURHUF=> 284.86 287.17 +0.81% -5.09%
Croatian kuna <EURHRK=> 7.194 7.195 +0.01% +1.6%
Romanian leu <EURRON=> 4.363 4.388 +0.57% -2.88%
Serbian dinar <EURRSD=> 104.2 104.38 +0.17% -7.98%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 138bps over bmk*
7-yr T-bond CZ7YT=RR -10 basis points to +159bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +154bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +650bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +601bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +513bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1233 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham/Ruth Pitchford/Editing by Toby Chopra)
