* For full poll data please see <CEEFXPOLL01>
* Zloty seen firming 5 pct, forint and leu 4 pct in 12 mths
* Zloty, forint, crown seen retreating in next 1-3 months
* Crown seen weaker in full 1-12 month horizon
By Sandor Peto
BUDAPEST, Aug 5 (Reuters) - Central European currencies are
expected to firm further in the next 12 months but their fast
appreciation in the past few weeks was overdone and the units
are likely to retreat in the next 1-3 months, a Reuters poll of
analysts showed on Thursday.
The currencies of the European Union's (EU) main emerging
economies have surged since June, lifted by a rise in risk
appetite in the world and in Europe.
The consensus view of the 35 analyst in the Aug. 2-4 poll
was that the zloty <EURPLN=> could gain further 5 percent versus
the euro in the next 12 months compared with Wednesday's close,
and the forint <EURHUF=> and the leu <EURRON=> about 4 percent.
But the crown <EURCZK=> -- which has led the strengthening
with a 4 percent advance in the past 5 weeks to 20-month highs
-- has no more room to rise according to the consensus forecast.
It is expected to give up 1.5 percent to 25.0 against the
euro by the end of August and 2.4 percent to 25.23 by the end of
October before rebounding to 24.7 by the middle of next year.
The zloty and the forint are expected to retreat about one
percent versus the euro by the end of this month, easing to 4.03
and 283.87, respectively, while the leu is seen flat at 4.25.
The last industrial indices showed a slip in Czech and
Polish activity in July and analysts said that may indicate
softer economic growth in the rest of 2010 in the region which
is heavily reliant on exports to Western Europe. []
"More and more signs of an (economic) slowdown can emerge in
the U.S. and the euro zone (in the next few months), and that
can lead to some weakening (of currencies in Central Europe),"
said Gyula Toth, analyst of UniCredit MIB in Vienna.
Capital flows into the region's risky assets have been also
encouraged in the past weeks by the euro's <EUR=> rebound to
beyond 1.3 against the dollar.
But a separate Reuters poll showed the euro's rally could
soon reverse as Europe is returning to tighter fiscal policy.
[] That could weigh on the euro zone's import
demand and the global economic recovery may also slow.
Such changes can cushion the gains of government bonds in
the region, but weigh on currencies at least in the short term.
"The loss of global growth momentum is beginning to
drag down growth momentum in the EMEA region and monetary
tightening cycle in the region might be coming to an end before
it started and further erode 'carry support' for
the EMEA currencies," Danske Bank said in a weekly note.
LOCAL RISKS
The analysts also noted that domestic risks can also weigh
on the region's currencies in the next few months.
The crown's gains have been supported by expectations that
the new Czech government could implement structural reforms, but
the negative impact of the strong currency on the Czech economy
may prompt intervention from the central bank, analysts said.
Barclays Capital said in a weekly note that it was bullish
on most currencies in emerging Asia but neutral on the crown,
the zloty and the leu, and neutral or bearish on the forint.
Hungary's talks with its lenders, the European Union and the
International Monetary Fund (IMF) collapsed last month.
"We do, nonetheless, still hope that after the municipal
elections (in October) the government will be willing to take
specific and convincing steps towards sustainable fiscal
consolidation, which could also help the forint return to its
long-term appreciation path," said Gyorgy Barta of CIB Bank.
"The biggest risk to this scenario would be further
confrontation with our lenders and possible downgrades by rating
agencies," he added.
Romania, which has been also bailed out by the IMF and the
EU, faces tough talks with lenders later this year even though
it extended its loan agreement on Wednesday. []
"Political tension may resume in September and along with
probably a more problematic IMF review could fuel depreciation
pressures," said Vlad Muscalu of ING Bank. "These may be allowed
by the central bank, at least to some extent, given the current
dire economic conditions (recession)," the analyst added.
To see latest poll on major currencies: []
For more analyst comments on CEE currencies please click on
[]
Central European currency reports: []
(Reporting by Sandor Peto/Marton Dunai/Krisztina Than;
Editing by Ron Askew)
