* Zloty firms as govt/Eureko deal eases supply concerns
* Crown weaker as dovish cbank remarks continue to be felt
* Uncertainty over politics, IMF policy weighs on leu
(adds detail, quotes, updates markets)
By Marius Zaharia and Marton Dunai
BUCHAREST/BUDAPEST, Oct 6 (Reuters) - The Polish zloty made
the most of improved global risk appetite on Tuesday,
outperforming regional peers as concerns that a large dividend
payment would flood the market with the currency disappeared.
Stock market gains across Europe benefited other regional
currencies as well, with only the Czech crown slipping into
negative territory.
The crown, still the only regional currency to record
overall gains so far this year, fell to a four-week low as the
central bank struck a dovish tone. []
In Romania, political uncertainty continued to hold back the
leu, while Hungary's forint was flat as worse-than-expected
industrial output figures prompted speculation that the central
bank's easing cycle might take the key rate lower than
previously seen. []
A regional Reuters poll showed on Tuesday that Central
European currencies are expected to post modest gains against
the euro in the next months, while the zloty is seen surging
about 8 percent over 12 months []
At 1401 GMT, the zloty <EURPLN=> was 0.6 percent firmer,
while the forint <EURHUF=> and the leu <EURRON=> were up 0.1
percent. The crown <EURCZK=> was 0.3 percent lower.
The zloty, seen outperforming its peers in the longer run,
was propped up by details of an agreement on Friday between
Poland and Dutch firm Eureko. []
The $1.6 billion deal, ending an ownership battle over
Polish insurer PZU, included Eureko receiving a total of more
than 8 billion zlotys, igniting concerns that it would flood the
market with the Polish currency.
"We are seeing a long squeeze which is fuelled by positive
developments with... the Eureko story," one Warsaw-based dealer
said. "The market is badly caught long (in) EUR/PLN, which is
wrong, and that's why (the zloty) is gaining more than others."
Bond yields in Poland were stable after tracking the zloty
lower in the morning, said Piotr Koluda, a fixed income trader
at PKO BP bank in Warsaw.
An upcoming auction, in which the finance ministry plans to
offer 3.0-4.5 billion zlotys of 2-year bonds, should attract
healthy demand, dealers said. The ministry has said it would
issue less debt in the fourth quarter than earlier thought.
Czech bonds were better bid than the crown, dealers said,
although yields along the curve were mixed. In Hungary, yields
were also stable, with markets keeping an eye on an upcoming
auction on Thursday <HUISSUE>.
ROMANIA SHAKY
In Romania, markets waited more political news after the
ruling coalition split last week, leaving behind a fragile
minority government.
The opposition Liberal Party threatened a no-confidence vote
against the minority government, and the Social Democrats, which
left the cabinet last week, said they would back it.
However, it was unclear whether the government would fall,
leaving markets on stand-by.
"While the market hasn't built any expectation for a
no-confidence vote, it is clear the leu will weaken if the
government collapses," one Bucharest-based dealer said.
Markets fear Romania will fail to pass reforms prescribed by
the International Monetary Fund under an aid deal earlier this
year, with a large-scale general strike on Monday underscoring
mounting social pressures ahead of presidential polls.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.571 25.501 -0.27% +4.62%
Polish zloty <EURPLN=> 4.188 4.211 +0.55% -1.74%
Hungarian forint <EURHUF=> 266.81 267.04 +0.09% -1.22%
Croatian kuna <EURHRK=> 7.255 7.257 +0.03% +1.52%
Romanian leu <EURRON=> 4.259 4.264 +0.12% -5.74%
Serbian dinar <EURRSD=> 93.01 93.06 +0.05% -3.8%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -6 basis points to +146bps over bmk*
7-yr T-bond CZ7YT=RR +12 basis points to +189bps over bmk*
10-yr T-bond CZ10YT=RR +10 basis points to +179bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +390bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +337bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +304bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +546bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +517bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +465bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1601 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Sue Thomas, John Stonestreet)
