* Forint, stocks rally lead FX higher, aid bonds
* Hungary c.bank talks up forint, may have intervened
* Leu edges up as Romania closer to IMF deal
(Recasts with forint, adds bonds, updates prices)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, March 10 (Reuters) - The forint led gains
in central Europe on Tuesday after Hungary's central bank said
it was actively supporting the forint and Romania sought aid to
ride out the global crisis.
The forint jumped more than 2 percent over Monday levels in
the late afternoon, pushing the Polish zloty higher and the
Czech crown -- the region's best performer this year -- to a
two-month high as a rally in stocks added to gains.
Hungarian central bank Governor Andras Simor signalled in a
TV interview that the bank was actively supporting the forint
currency, though he would not say how and in what amounts the
bank had bought forints.[]
The pledge followed a weekend statement saying the bank
would channel European Union funds into the market and pump euro
liquidity into the banking system to prop up the forint, which
sank to a record low of 317.45 to the euro last week.
The Hungarian forint <EURHUF=> firmed 1.9 percent to 304.3
to the euro by 1602 GMT, but has lost 13.9 percent this year,
outpacing up to 12 percent losses for the region.
"It's hard to say anything, I can only make guesses," a
local dealer said, giving a 70 percent probability the central
bank had bought forints. "We haven't seen the (central bank) and
we saw interest from hedge funds to buy the forint."
In Poland, the zloty <EURPLN=> gained 1.4 percent and the
Czech crown <EURCZK=> rose 1.7 percent, helping lift bond
prices, dealers said. The leu <EURRON=> gained just 0.3 percent
to 4.287 to the euro, with dealers saying only the size of any
IMF-led aid deal was likely to benefit the Romanian unit.
Central European stocks jumped, riding a boost in global
sentiment after news banking giant Citigroup <C.N> was
profitable to start 2009. []
Policymakers have become more vocal in support of currencies
that have dropped sharply in 2009 as the global economic
slowdown punishes central Europe's export-heavy economies.
On Monday, Poland's central bank said it was ready to
intervene if needed to prop up the zloty. Last month it sold EU
funds on the market when the zloty neared a record low.
ON THE GROUND
Capital flows to emerging Europe that once fuelled booming
growth have reversed, putting strain on many countries. In
Tuesday note, Merrill Lynch analysts estimated the region would
need combined gross external financing of $460 billion in 2009.
Romania said on Tuesday it had started talks with the
European Commission, the International Monetary Fund and other
institutions to seek "medium-term foreign financial assistance",
a bailout which economists said could reach 20 billion euros.
"The leu would have firmed on the IMF news, had it
depreciated in line with the region in the past," one dealer
said, adding news on the size of the deal could be a mover.
"The market is pricing in 5-10 billion euros, but if
(Romania) gets 20 billion euros, the leu should rally."
Dealers have said the central bank has sold euros in the
market in this year, helping the unit fare better than peers.
An IMF team was due to start a two-week visit to Bucharest
on Wednesday to discuss a potential loan programme. President
Traian Basescu told Parliament on Monday a foreign loan was the
only solution to aid the troubled economy. []
"The package should ease fears of a complete financial
meltdown in Romania," Neil Shearing, emerging European economist
at Capital Economics, said in a note.
"More generally, an IMF rescue package does not alter the
fact that the leu remains fundamentally overvalued."
Hungary secured a $25 billion IMF-EU package in October,
becoming the first EU member to get aid. Analysts have
speculated for weeks that Romania would become the third bloc
member -- after Hungary and Latvia -- to get help.
Unlike Latvia, Romania has not experienced large street
protests but analysts believe social pressures will continue to
mount, threatening the new government coalition's stability.
Policymakers have repeatedly stated over the past weeks that
currencies were undervalued, and stronger countries like the
Czech Republic and Poland have tried distancing themselves from
neighbours' problems. But analysts predict further FX weakening.
"The previous flow of capital is turning into an ebb which
is fundamentally what will maintain pressure on currencies,"
Swedish bank SEB's chief emerging markets strategist Mats
Olausson said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.084 27.543 +1.69% -1.22%
Polish zloty <EURPLN=> 4.673 4.736 +1.35% -11.94%
Hungarian forint <EURHUF=> 304.3 309.95 +1.86% -13.39%
Croatian kuna <EURHRK=> 7.437 7.45 +0.17% -0.97%
Romanian leu <EURRON=> 4.287 4.3 +0.3% -6.36%
Serbian dinar <EURRSD=> 94.238 94.228 -0.01% -5.05%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +12 basis points to 237bps over bmk*
4-yr T-bond CZ4YT=RR -14 basis points to +248bps over bmk*
8-yr T-bond CZ8YT=RR -24 basis points to +301bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -11 basis points to +444bps over bmk*
5-yr T-bond PL5YT=RR -14 basis points to +393bps over bmk*
10-yr T-bond PL10YT=RR -13 basis points to +334bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -16 basis points to +1229bps over bmk*
5-yr T-bond HU5YT=RR -19 basis points to +1096bps over bmk*
10-yr T-bond HU10YT=RR +13 basis points to +924bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1707 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/Jason
Hovet; Editing by Stephen Nisbet)
