* Czech crown hits 11-week low
* Hungary bond sale lifted on high demand
* Dollar firming main driving force
(Updates throughout, adds bonds, fresh comment)
BUDAPEST, October 22 (Reuters) - Central European currencies
weakened in unison on Thursday as the dollar's firming versus
the euro pushed the region down, knocking out several key
stop-loss barriers and prompting short-covering, dealers said.
The Polish zloty led losers with a 0.67 percent drop against
the euro, closely followed by the forint's 0.59 percent loss and
the Czech crown's 0.44 percent slide after hitting an 11-week
low.
"The dollar coming back under 1.50 (versus the euro) and
short covering ahead of the weekend pulled the market down," a
Budapest-based dealer said.
"Several stop-loss barriers were breached, which aggravated
the losses, but it looks worse than it actually is since
turnover remains very low," the dealer added. "The region just
gained too much too quickly this week and it's giving back some
of that."
Dealers added that retail sales data also failed to offer
any support to the forint as they showed that sales fell by an
annual 7.2 percent in August, the steepest rate in more than 20
months, and indicated that the country's recession remained
deep. []
But the forint may find some support from Thursday's auction
of three, five and ten year bonds after the debt agency sold 60
billion forints worth of bonds, above the 50 billion on offer,
with all auctions well oversubscribed. []
Others added that short-covering ahead of a 3-day holiday
weekend points towards forint weakening on Thursday as markets
will be closed on Friday.
"I expect the forint to start heading back towards 270 next
week," the currency dealer said.
The Czech crown fell to the weak side of 26 to the euro on
Thursday for the first time since Aug. 5, but some dealers
expected some rebound as the level still proves resistant.
"It looked like some orders from London banks, but I think
26 per euro will be a strong (resistance) level," a Prague-based
earlier said. "We could see some stop losses under this level
and could move back around 25.900."
Dealers in Warsaw also said that the dollar's movements on
Thursday were the main factor behind the zloty's weakness and in
the absence of domestic market moving factors, the currency
would continue taking short-term clues from the dollar, a
customary barometer of risk appetite.
The release of the Polish central bank's minutes from the
September meeting of the Monetary Policy Council, due at 1200
GMT, is expected to be neutral for the currency market.
"We expect today's EUR/PLN to be in a range of 4.15-4.20,"
Bank BPH wrote in a morning note to clients.
The zloty could come under weakening pressure if current
privatisation plans fail to materialise, UniCredit analyst Gyula
Toth wrote to clients in a morning note.
"The failure of the Enea privatisation and the postponement
of the deadline for bids for the Stock Exchange... underlines
the risks around the very ambitious Polish privatisation plans,"
Toth wrote.
Poland on Wednesday said it will not reach its 2009
privatisation goal of 12 billion zlotys ($4.3 billion) after
failing to sell its stake in energy group Enea.
Income from privatisation, which the government estimates
will total nearly 37 billion zlotys through next year, is a
crucial tool for the government to curb its budget deficit.
[]
"Many bullish PLN comments are based on the assumption of
forthcoming privatisation inflows," Toth wrote. "We see some
risks that EUR/PLN moves a little bit higher in the near term
(probably to around 4.25-30)."
Romania will auction 950 million leu worth of 3-year bonds
later on Thursday and auction results could provide new guidance
for the currency.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.965 25.85 -0.44% +3.03%
Polish zloty <EURPLN=> 4.19 4.162 -0.67% -1.79%
Hungarian forint <EURHUF=> 266.12 264.54 -0.59% -0.97%
Croatian kuna <EURHRK=> 7.215 7.216 +0.01% +2.08%
Romanian leu <EURRON=> 4.291 4.287 -0.09% -6.45%
Serbian dinar <EURRSD=> 93.12 92.98 -0.15% -3.91%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +5 basis points to 75bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +100bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +80bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +354bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +310bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +278bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +10 basis points to +504bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +448bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +395bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1126 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai and Balazs Koranyi; editing by
Chris Pizzey/Ruth Pitchford)
