* Zloty, crown lead FX gains, driven by strong data, euro
* Czech crown strongest since mid May
* Bonds mixed as investors worry output gains won't last
* Romania growth outlook sours after tax hikes, wage cuts
(Adds new comments, updates markets)
By Sandor Peto and Jana Mlcochova
BUDAPEST, July 9 (Reuters) - Central European currencies
extended this week's gains on Friday on sustained global risk
appetite, but debt markets were mixed as a recent rally petered
out and medium-term economic prospects remained uncertain.
Strong May output in the euro zone's main economies propped
up the euro <EUR=> to near the key 1.27 level, also giving a
boost to the central European currencies which tend to follow
it.
"As long as the euro/dollar is as high as this, risk
appetite is clearly there, and the flow in this region will
continue," said Roman Fol, an FX trader at Raiffeisenbank.
This week's May output data from Poland, Hungary and the
Czech Republic was also solid, further cheering investors.
[]
Poland's zloty <EURPLN=> and the Czech crown <EURCZK=> led
gains, both adding 0.4 percent. The crown traded at an
eight-week high and the zloty was near a two-week high. The
Hungarian forint <EURHUF=> firmed by a third of a percent.
But Romania's leu <EURRON=> dipped, giving up 0.19 percent.
The weakness might reflect a lack of direct support from the
central bank, which has often intervened in Romanian markets,
one analyst said.
"We have noted that the assumed central bank presence in the
FX space seems to be fading and market players may take this as
a hint to sell the (leu)," said ING economist Vlad Muscalu.
The forint <EURHUF=> broke through the key mark of 280,
which traders said was a strong support level.
Dealers said the main factors to watch would be a new
financial sector tax, which the centre-right government expects
will raise around 187 billion forints in revenue this year and
an ongoing IMF/EU review of a $25.1 billion loan signed in 2008.
The review, which began on Tuesday and is expected to
continue throughout next week, will assess whether Hungary is on
track towards meeting a 3.8 percent of GDP deficit target this
year and may also touch upon the financial tax.
"These can have a tangible market impact but aside from
these two I would not expect any domestic development to affect
the market," a Budapest-based dealer.
Hungary's bonds paused after a recent rally. The curve began
to steepen as the short end was still being bid, while offers
dominated the longer maturities.
SECOND HALF SLOWDOWN
In Poland, bonds were flat, with dealers citing the holiday
season as the reason behind low investor activity. The country's
first dollar bond issue went smoothly on Thursday, all $1.5
billion of 5-year paper being sold. []
The region's strong output figures were offset by concerns
that a possible slowdown in the euro zone in the second half of
2010 could curb export growth once again, analysts said.
Romanian markets returned to a weakening path, no longer
trading on the International Monetary Fund's approval on the
disbursement of the latest tranche of the country's 20 billion
euro bailout deal.
Prospects for the recession-hit economy have significantly
worsened after cuts in public wages and a hike in value added
tax and analysts now expect gross domestic product to shrink by
a further 2.5 percent in 2010. []
While June inflation due on Monday is expected to remain
within the central bank's target band, the VAT hike should push
prices significantly higher later this year, subdue local demand
and prolong the recession.
Poland's new central bank Governor Marek Belka, meanwhile,
projected 3 percent growth for 2010 and 3.5 percent for 2011.
His forecasts, though robust, were below earlier projections by
the bank and the government. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.367 25.411 +0.17% +3.75%
Polish zloty <EURPLN=> 4.074 4.087 +0.32% +0.74%
Hungarian forint <EURHUF=> 280.09 280.8 +0.25% -3.48%
Croatian kuna <EURHRK=> 7.186 7.19 +0.06% +1.71%
Romanian leu <EURRON=> 4.24 4.227 -0.31% -0.06%
Serbian dinar <EURRSD=> 103.74 103.69 -0.05% -7.58%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -14 basis points to +88bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +130bps over bmk*
10-yr T-bond CZ9YT=RR -4 basis points to +125bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +368bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +317bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +588bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +559bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1140 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto; Editing
by Toby Chopra, John Stonestreet)
