* Zloty leads drop as cbank continues to talk it down
* Czech Q4 GDP revised upwards, crown not affected
* Dealers say time right for FX correction
* Romania sells 1 bln euro in 5-yr eurobond
(Adds Czech GDP, Polish cbanker, Romania eurobond)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, March 11 (Reuters) - The zloty led a
correction from this week's multi-month highs in central Europe
on Thursday as Poland continued to talk down the currency, while
the Czech crown was unfazed by a revision in GDP figures.
Data showed the Czech economy grew on a quarterly basis to
end 2009, defying a flash estimate showing a contraction and
confirming the export-reliant country was out of recession.
[]
But the crown <EURCZK=>, which lagged the corrective move in
the region, was little changed by the news, as final data was
closer to what markets had expected.
Improving data has fuelled gains for emerging European
assets in the past month, with more investors attracted to the
region after concerns over euro zone peripheral debt rattled
markets there.
But with the sharp rise seen over the past month and Polish
and Romanian policymakers voicing increased concerns over the
growing strength of their currencies, dealers said a correction
was needed to bring levels better into line.
A string of dovish comments by Polish central bankers
continued on Thursday, when new Monetary Policy Council member
Elzbieta Chojna-Duch said nothing pointed to a need to increase
interest rates [].
Those comments further depressed the zloty after it was
knocked off a 15-month peak by governor Slawomir Skrzypek, who
said fundamentals did not justify the current state of currency
markets. []
"It's time for a correction," a Warsaw dealer said. "The
question is how big the correction could be."
The zloty <EURPLN=> fell 0.7 percent on Thursday to bid at
3.905 to the euro by 1351 GMT. The crown and the forint
<EURHUF=> were 0.2-0.4 percent weaker.
FIGHTING FX STRENGTH
Analysts say the sharp rise in the EU's emerging currencies
may hurt economic recovery this year, and policymakers look
likely to battle this threat by keeping interest rates low and
threatening market intervention. []
"The zloty at such (strong) levels does not make sense,"
said Ulrich Leuchtmann, head of foreign exchange research at
Commerzbank in Frankfurt.
"It should not be much below 4.00 (per euro). The speed of
appreciation we have seen since January is way too high; the
Polish economy cannot live with such speedy appreciation."
Investors appetite for emerging Europe has also been a boon
for debt markets, with yields dropping across the region.
Romania sold 1 billion euros in a 5-year eurobond, which
drew total bids worth almost 5 billion euros at 268 basis points
over mid-swaps. []
Polish bonds firmed on the long end after a well-bid 2-year
bond tender on Wednesday []. In Hungary, yields on
3- and 5-year bonds auctioned on Thursday dropped 36-45 basis
points since a sale two weeks ago [].
"The low interest rate environment in the world and in the
euro zone may not change until next year and the hunger for
high-yielding assets is rising," one Budapest-based fixed income
trader said, adding that yields were likely to fall further.
Romania's leu <EURRON=> dipped 0.15 percent to 4.094 per
euro. Dealers expect it to remain the region's least volatile
currency this year as well as markets perceive a high risk of
central bank intervention to stem gains.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.585 25.531 -0.21% +2.86%
Polish zloty <EURPLN=> 3.905 3.876 -0.74% +5.1%
Hungarian forint <EURHUF=> 267.15 266.11 -0.39% +1.2%
Croatian kuna <EURHRK=> 7.263 7.263 0% +0.64%
Romanian leu <EURRON=> 4.095 4.089 -0.15% +3.48%
Serbian dinar <EURRSD=> 99.72 99.803 +0.08% -3.85%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 81bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +114bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR -9 basis points to +312bps over bmk*
10-yr T-bond PL10YT=RR -7 basis points to +263bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -14 basis points to +497bps over bmk*
5-yr T-bond HU5YT=RR -20 basis points to +435bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +406bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; editing by Ron Askew)
