* Bank demand offsets Romanian rate cut to lift leu
* Other FX steady, watching euro/dollar; stocks mixed
* Serbia cbank moves to intervene, dinar little moved
(Adds Serbia dinar, Romania analyst, updates market)
By Jason Hovet and Marton Dunai
PRAGUE/BUDAPEST, Jan 6 (Reuters) - The Romanian leu rose to
a more than six-month high on Wednesday, extending gains past
technical levels on increased demand from local banks, while
other emerging European currencies changed little.
Several dealers said banks in Romania had moved to reduce
some of the hard currency provisions set aside last year, buoyed
by a generally more stable currency and the easing of funding
and political risk.
The euro sales helped offset a surprise Romanian interest
rate cut on Tuesday that reduces the premium for keeping funds
in leu and raised concerns among some analysts that the currency
may weaken as a result. []
The leu broke the 4.18 per euro support level on Tuesday and
it looks bound for the 4.12-4.18 range, dealers said, noting
that the currency still has the highest carry in the region.
The leu <EURRON=> added 0.6 percent to 4.16 to the euro by
1312 GMT. But analysts have stayed cautious on the currency
despite recent gains.
The last Reuters poll in December forecast the currency at
4.29 to the euro after a three-month period before gradual
appreciation to 4.15 before the end of 2010. <CEEFXPOLL03>
"In the last couple months there were positive
developments," ING strategist Agata Urbanska said.
"But it still doesn't change the underlying fundamentals of
poor growth and a current account deficit narrowing sharply but
still around 5 percent of GDP; so far from the surplus we see in
other countries."
SERBIA CBANK INTERVENES
The Serbian dinar <EURRSD=> was flat despite a central bank
intervention for the second straight day to satisfy growing
demand for hard currency. Dealers said the bank would intervene
throughout the beginning of 2010. []
A rally in Central European markets lost steam in the final
months of last year. Stocks were mixed on Wednesday, with the
Budapest bourse <> falling 0.1 percent at 0250 GMT while
Prague added a quarter of one percent and Warsaw 0.2 percent.
While strong investor appetite for emerging market assets
should benefit the region, many strategists say gains in the
first half of the year will be subdued by elections in several
countries that raise political uncertainty.
Hungary's forint <EURHUF=> held on the strong side of 270
per euro, adding 0.1 percent, while bond yields dropped after
the 2009 budget deficit came in below target. []
But some analysts have recommended selling forints for
euros, citing looming risks. [] []
The Polish zloty <EURPLN=>, tapped as an outperformer, eased
0.1 percent on Wednesday, as did the Czech crown <EURCZK=>.
Polish bonds strengthened on Wednesday on the back of a
successful switch tender as well as news about a lower than
expected 2009 budget deficit [] and a healthy
profit seen at the central bank [].
Dealers said markets were watching the euro/dollar, which
slipped early after an European Central Bank executive board
member was quoted as saying that the European Union would not
bail out Greece. []
The euro is central Europe's main reference, and currencies
often track euro/dollar moves.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.305 26.267 -0.14% +0.05%
Polish zloty <EURPLN=> 4.096 4.091 -0.12% +0.2%
Hungarian forint <EURHUF=> 268.65 268.97 +0.12% +0.63%
Croatian kuna <EURHRK=> 7.288 7.286 -0.03% +0.29%
Romanian leu <EURRON=> 4.157 4.182 +0.6% +1.93%
Serbian dinar <EURRSD=> 96.87 96.89 +0.02% -1.02%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +22 basis points to +93bps over bmk*
7-yr T-bond CZ7YT=RR +3 basis points to +86bps over bmk*
10-yr T-bond CZ10YT=RR +9 basis points to +79bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +385bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +345bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +281bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +574bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +500bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +434bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1612 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marton Dunai, editing by Patrick Graham and Andy Bruce)
