* Czech crown leads gains, leu weakens as IMF allows higher
budget deficit
* Zloty, forint give up some previous gains, tracking
stocks, rising dollar
(Adds fresher quote, prices)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Aug 10 (Reuters) - The Czech crown led
currency gains in Central Europe on Monday, supported by
corporate demand despite inflation figures showing that more
central bank interest rate cuts may come.
The leu, however, eased slightly after the International
Monetary Fund said it has allowed Romania to raise its budget
deficit target this year and next to prevent further deepening
recession through fiscal austerity. []
Following its first review of Romania's performance under a
20 billion euro aid deal it led in March, the IMF also doubled
its forecast for economic contraction this year to more than 8
percent, from the 4.1 percent it had expected in March.
The leu <EURRON=> eased 0.2 percent per euro by 1355 GMT.
Poland's zloty and Hungary's forint gave up most of their
early gains as falls by stock markets in Europe and the U.S.,
and a strengthening of the dollar to the euro signalled a less
favourable backdrop for risky assets.
The crown<EURCZK=>, which fell to a three-week low last
week, underperforming the pack, firmed by 0.65 percent.
The zloty <EURPLN=> was almost unchanged to the euro, while
Hungary's forint <EURHUF=> was 0.2 percent firmer.
Czech consumer inflation fell more than expected in July and
some analysts said last week's interest rate cut by the Czech
central bank was probably not the last one in the easing
cycle.[]
The region's stocks firmed on Monday with Budapest BUX
<> gaining almost four percent, and Warsaw's WIG20 <>
and Prague's PX <> rising by about one percent.
"In the morning the zloty touched its recent highs, but its
further appreciation has been stopped by the rising dollar and
the Polish unit remains between 4.08-4.18 now," said Jakub
Wiraszka, dealer at BRE bank in Warsaw.
Poland's better fundamentals and Hungary's higher yields
meant the zloty and forint benefited the most from growing
confidence in an economic recovery recently.
The zloty, picked by analysts in a Reuters poll last week to
outperform peers in the months ahead [], has swung
the most in the past year, at one point losing a third of its
value.
But Poland has avoided the economic contractions that have
gripped its neighbours, and the zloty has risen 6 percent since
July 1 while the forint, crown and Romania leu <EURRON=> are
flat.
BONDS FLAT TO WEAKER
In Hungary, where interest rates stand at 8.5 percent even
after a larger than expected 100 basis point cut two weeks ago,
the higher yield has aided assets in the summer risk rally, and
debt funds have been favouring the market to peers.
[]
Hungarian government bonds remained relatively unchanged on
Monday in the run-up to a large bond expiry due on Wednesday.
Polish bonds were slightly weaker ahead of a 5-year bond
auction on Wednesday.
"It looks like we're heading for a little correction," said
Pawel Bialczynski, dealer at BRE bank in Warsaw. "Bond prices
rose sharply recently, and many investors are keen now to take
profits."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.673 25.84 +0.65% +4.21%
Polish zloty <EURPLN=> 4.116 4.119 +0.07% -0.02%
Hungarian forint <EURHUF=> 269.19 269.73 +0.2% -2.1%
Croatian kuna <EURHRK=> 7.32 7.333 +0.18% +0.61%
Romanian leu <EURRON=> 4.21 4.203 -0.17% -4.65%
Serbian dinar <EURRSD=> 93.327 93.27 -0.06% -4.12%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -13 basis points to 94bps over bmk*
4-yr T-bond CZ4YT=RR -18 basis points to +128bps over bmk*
8-yr T-bond CZ8YT=RR +4 basis points to +242bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +330bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +277bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +257bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -22 basis points to +660bps over bmk*
5-yr T-bond HU5YT=RR -54 basis points to +596bps over bmk*
10-yr T-bond HU10YT=RR -45 basis points to +516bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1555 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 and
Dagmara Leszkowicz)
