* Dealers say cbank intervention behind leu outperformance
* Other FX weaker as ZEW disappoints
* Hungary markets confused over Orban comments
By Marius Zaharia
BUCHAREST, Sept 14 (Reuters) - The Romanian leu jumped on
Tuesday, with dealers citing covert central bank intervention,
while other emerging European currencies fell on a disappointing
economic sentiment indicator from Germany, the region's main
trading partner.
Five dealers said the central bank was behind the move that
saw the leu <EURRON=> climb to 4.239 per euro by 1059 GMT from
around 4.26, with two of them estimating a tiny 100-150 million
euros may have been sold in thin trade. []
"It moved more than 150 pips, with banks that are the usual
intervention instruments selling (euros) at a timing very
similar to past interventions, before the fixing," one dealer
said.
The reasons for any intervention were unclear, as the leu
traded within the 4.2-4.3 per euro range seen as the central
bank's "comfort zone". Another dealer suspected the bank may
fear second-round effects on inflation from a July VAT hike.
The central bank, which is suspected of constantly
intervening in the market against both sharp weakening or
firming since late 2008, was not immediately available for
comment on Tuesday.
The leu <EURRON=> was up 0.5 percent on the day, while the
Polish zloty <EURPLN=> and Hungarian forint <EURHUF=> were
0.2-0.4 percent weaker.
Germany's ZEW economic sentiment indicator, which came in
well below expectations, was the reason for weakness in the rest
of the region, as it increased worries that the fragile
export-driven recovery may hit the wall. []
The Czech crown <EURCZK=>, usually more resistant to shifts
in risk appetite, was up by a touch.
HUNGARY PUZZLE
The forint had four consecutive sessions of gains before
Tuesday, lifted by an announcement by Economy Minister Gyorgy
Matolcsy last week that Hungary wanted to cut its budget deficit
next year to below the EU's ceiling of 3 percent of GDP.
On Monday, Prime Minister Viktor Orban reiterated the plan
in a speech in parliament, but also said Hungary would fight in
Brussels for a budget accounting change. []
That sowed confusion among market players as it was unclear
whether the changes desired by Hungary were a condition of it
being able to reach the 2011 budget deficit goal.
Hungary sold more than planned at a three-month T-bill
auction on Tuesday, with the average yield falling 5 basis
points to 5.48 percent. [] However, on the
secondary market, yields rose slightly above three-week lows hit
in the previous session.
On Monday, Romania sold only a third of a planned 1 billion
lei one-year treasury bill sale, signalling it had no plans to
change its current strategy of capping yields at 7 percent. That
is seen as a risky bet as its short-term funding needs pile up.
[]
The auction went better than a six-month tender earlier this
month and a one-year sale last month, helped by slightly
better-than-expected inflation data in August.
"However, we doubt this faint improvement is a sign of
things to come as only two primary dealers of the 12 bought
yesterday's issuance," ING Bank said in a note.
"We maintain our call that eventually this yield cap will be
abandoned as it constrains access to funding."
Polish bonds were steady ahead of August inflation data at
1200 GMT. In the Czech Republic, the government and labour
unions were discussing the budget draft for 2011.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.571 24.626 +0.22% +7.11%
Polish zloty <EURPLN=> 3.95 3.931 -0.48% +3.9%
Hungarian forint <EURHUF=> 283.6 282.98 -0.22% -4.67%
Croatian kuna <EURHRK=> 7.285 7.283 -0.03% +0.33%
Romanian leu <EURRON=> 4.239 4.259 +0.47% -0.04%
Serbian dinar <EURRSD=> 105.22 105.12 -0.1% -8.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 105bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +93bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +96bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +395bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +381bps over bmk*
10-yr T-bond PL10YT=RR +9 basis points to +311bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +600bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +559bps over bmk*
10-yr T-bond HU10YT=RR +6 basis points to +464bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1159 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;
Editing by Hugh Lawson and Susan Fenton)
