(Repeats story published late on Thursday)
By Michael Winfrey,
Economic correspondent, Central Europe and the Balkans
PRAGUE, May 29 (Reuters) - Currency traders betting on the Slovak crown can
start packing up shop, because its central parity rate against the euro
following its revaluation will probably be the official rate for euro zone
entry.
But the decision, taken late on Wednesday, signalled that Poland, the Czech
Republic, Hungary and other euro zone hopefuls may be encouraged to pursue
strong conversion rates when they finally join the euro zone, giving them a
short-term boost.
The move pushed the crown's central parity in the ERM-2 exchange rate
mechanism 15 percent to the strong side to 30.1260 per euro, jumping past the
crown's historic trading high and surprising markets in both its timing and
scope.
It pushed the crown around 0.8 percent firmer to a new record high of 30.080
per euro. It also spurred the Hungarian forint 0.73 percent to a five-year high
of 241.21 per euro and lifted the Polish zloty 0.22 and the Romanian leu 0.5
percent.
Despite the gains, analysts said the revaluation had effectively ended long
crown positions.
"Is this it for EUR/SKK? Most likely," Morgan Stanley said in a research
report.
Prime Minister Robert Fico appeared to cast some doubt over whether the new
central peg -- 17.6472 percent stronger in international terms -- could be the
final euro-crown conversion rate, saying it "has nothing to do with parity".
But a Reuters snap poll of analysts [] showed the market
expects Bratislava to convert the crown to the euro at the central parity rate.
Martin Blum, head of emerging markets strategy at Unicredit, said it was time to
take profits.
"We don't expect another revaluation from here, but when they announce the
final, final figure in the first week of July, we expect them to massage it
slightly to 30 (per euro) because it's a convenient figure for people to use,"
he said.
"Effectively, this is it. Everyone can pack up."
LESSON TO OTHERS
Morgan Stanley said the Slovak lesson for future euro zone joiners -- the
next one is expected in around 2012 -- is that they could allow their currencies
to climb on a "crawling peg" ahead of euro zone entry, potentially firming
significantly.
"Other future entrants will learn that it is acceptable to
appreciate one's way into the euro," it said.
The crown has firmed 5.4 percent to the euro since May 7, when the European
Commission said Slovakia was ready to join the zone, and 25 percent since
Slovakia's 2004 EU entry.
The gains, cemented by Slovakia's two revaluations, have boosted the incomes
of its 5.4 million people, helped fight inflation, and brought its exchange rate
closer to the euro zone's, reducing its still sizeable cost advantage over its
future monetary union partners.
Economists said there was a small but unrealistic chance the unit could
appreciate further because the central bank was no longer under pressure to keep
it within the strong end of the previous ERM-2 band.
"At least in theory, (the crown) could appreciate to as high as 25.6 per
euro," Morgan Stanley said. "This is unlikely to happen over the next month, of
course."
Dresdner Kleinwort economist Raffaella Tenconi added: "Until the actual euro
exchange, anything can happen. That said, I think the big moves have been done.
I expect the final conversion rate to be very close to the new parity."
They also said that, even if regional currencies show short term gains on
the news, capitals like Budapest and Prague have a long way to go before the
Slovak example might come into play.
"The bigger picture is that none of these countries are anywhere close to
euro entry for some time," said Neil Shearing from Capital Economics in London.
(Editing by Gerrard Raven)
