(Updates throughout, changes dateline)
BUDAPEST, Sept 1 (Reuters) - Central European currencies
eased on Monday as concerns over a slowdown in growth in the
region continued to weigh, while the Hungarian forint was hit by
political jitters and a warning from rating agency S&P.
Romania's leu bucked the trend after the country published
robust economic growth data.
The forint<EURHUF=D2>, the most volatile currency in the
region in past weeks, led losses after a former ally of the
Socialists rejected the government's tax cut programme, the
cornerstone of the 2009 budget.
The Free Democrats, whose votes the government needs to pass
the budget, warned that tax revenues from the black economy were
unlikely to finance tax cuts of 1.2 trillion forints ($7.58
billion) planned by the government.
The concerns were echoed later by Standard and Poor's (S&P)
which said the tax cuts, if implemented and followed by other
fiscal loosening measures, could lead to a downgrade of
Hungary's BBB+ rating.
The forint fell by 0.87 percent to the euro by 1427 GMT to
238.46. Government bond yields surged by around 15 basis points.
Analysts said bargaining about the 2009 budget would
continue between the Socialists and the Free Democrats.
"Investors have become cautious and the dollar's firming is
generally bad for emerging markets," one dealer said.
"We may test the 240 level and even a slow forint weakening
past that level is possible."
While Hungary's August Purchasing Manager Index (PMI) picked
up to 52.1 from 51.7 in July, the figure did not alleviate
concerns over slow economic growth, while Czech and Polish
figures underpinned expectations for an economic slowdown.
The Czech PMI for August fell to 47.3, the lowest level
since the series began in 2001, while Poland's PMI was even
lower at 45.8, the lowest figure since December 2002. Figures
below the 50 divide indicate contraction.
The Czech crown<EURCZK=> eased 0.23 percent against the euro
to 24.837, while the Polish zloty<EURPLN=> shed 0.39 percent to
3.343 to the euro.
Dealers expected further weakening in the crown, with a move
past 25 a euro possible for the first since the start of June.
"There is some temporary resistance around 24.80, but we are
going up to 25," said a Prague currency trader.
The leu<EURRON=> firmed 0.28 percent to 3.517 after data
showed the economy grew 9.3 percent in annual terms in the
second quarter, beating forecasts of 7.8 percent as strong
domestic consumption defied a downturn in western European
export markets.
*************************MARKET SNAPSHOT*********************
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.837 24.780 -0.23% +6.26%
Polish zloty <EURPLN=> 3.343 3.330 -0.39% +7.15%
Hungarian forint <EURHUF=> 238.460 236.400 -0.87% +5.69%
Croatian kuna <EURHRK=> 7.137 7.153 +0.22% +2.59%
Romanian leu <EURRON=> 3.517 3.527 +0.28% +1.77%
Serbian dinar <EURRSD=> 76.184 76.200 +0.02% +3.27%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +13 basis points to +12bps over bmk*
5-yr T-bond CZ5YT=RR +16 basis points to +18bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +36bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +496bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +453bps over bmk*
10-yr T-bond HU10YT=RR +19 basis points to +380bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1627 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
