* FX, stocks mostly give up modest gains after China move
* Focus on debt tenders, Hungary met heavy demand for bills
* Polish bonds fall further on rate hike expectations
(Updates throughout)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, June 22 (Reuters) - Hungary's forint and
Poland's zloty fell on Tuesday, giving up gains from the
previous day after investors booked profits from a risk rally
sparked by China loosening its grip on the yuan.
Polish bonds fell for a second consecutive day, boosting
yields to their highest level since the start of June as the
market started to price in interest rate hikes by the end of
2010.
"It is possible that the trend on the bond market is
changing and that prices will fall in the medium term," said one
Warsaw-based dealer.
Poland's industrial output posted a double-digit rise last
month, recent data showed, confirming that the recovery is on
track and that some tightening of monetary policy may be needed
in the second half of the year.
A member of the central bank's Monetary Policy Council,
Anna Zielinska-Glebocka, told Reuters in an interview that
Poland should raise rates by 50 basis points in one move in the
autumn from a current all-time low of 3.5 percent.
[]
The zloty <EURPLN=> fell 0.4 percent by 1434 GMT, after
touching a one-month high on Monday. Hungary's forint <EURHUF=>,
which firmed near its 50-day moving average on Monday before
retreating, dipped 0.5 percent.
The Czech crown <EURCZK=> was almost flat and Romania's leu
<EURRON=> was a touch up against the common currency.
Hungary's central bank sold 1.925 trillion forints in
two-week bills at a weekly tender, bringing the total stock of
bills to 3.953 trillion forints. []
Stock markets were down on Tuesday, falling some 0.7-1.3
percent across the region. The Thomson Reuters Equity Emerging
Markets Europe Index <.TRXFLDEETU> slipped 0.7 percent.
IPO's vs ZLOTY
Dealers played down any impact on the zloty from Tuesday's
news that Poland will collect some 1.3 billion dollars for state
coffers from an initial public offering for utility firm Tauron,
the fourth largest in Europe this year.
The news coincided with the government's announcement that
it would support the bid it expects from the biggest Polish
bank, state-controlled PKO BP, for Allied Irish Bank's <ALBK.I>
Polish unit BZ WBK <BZWB.WA>. [], []
"These two transactions are likely to balance each other,"
one Warsaw-based dealer said.
China's weekend move touched off optimism that a stronger
yuan would lift the global economy through higher demand for
goods and especially commodities.
But analysts expected limited lasting impact in central
Europe, whose region's currencies are much less dependent on
commodity prices than other emerging markets.
While lower-indebted central Europe has yet to shake off
fears the euro zone's debt woes may spread to the region,
analysts expect lower volatility to give a boost to currencies,
which are seen gaining this year in the economic recovery.
Czech dealers said the crown was finding tough resistance at
the 25.800 per euro level and would not likely weaken too far
past that in coming sessions. It bid around 25.800 on Tuesday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.768 25.765 -0.01% +2.13%
Polish zloty <EURPLN=> 4.054 4.039 -0.37% +1.23%
Hungarian forint <EURHUF=> 279.45 278.06 -0.5% -3.26%
Croatian kuna <EURHRK=> 7.199 7.2 +0.01% +1.53%
Romanian leu <EURRON=> 4.226 4.23 +0.09% +0.27%
Serbian dinar <EURRSD=> 103.61 103.8 +0.18% -7.46%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to 156bps over bmk*
7-yr T-bond CZ7YT=RR +6 basis points to +165bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +153bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +423bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +382bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +321bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +618bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +556bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +485bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1634 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 Stephen Nisbet/Ruth Pitchford)
