* Crown breaks resistance past 2010 highs
* Dealers say Romania cbank behind leu outperformance
* Hungary Econ Ministry reiterates budget pledge, bonds rise
(Recasts with crown, updates throughout)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, Sept 14 (Reuters) - The Czech crown broke
resistance levels to a 22-month high on Tuesday and the Romania
leu outperformed thanks to likely central bank intervention even
as weak stock markets dragged on other currencies.
A poor reading of Germany's ZEW economic sentiment indicator
dragged on the region with investors worried the fragile
export-driven recovery in emerging Europe may hit the wall,
especially if fiscal cuts begin to hamper growth.
Hungarian assets were boosted by comment from the Hungarian
Economy Ministry cleared some confusion over Hungary's pledge to
reduce its budget deficit next year, and whether it hinged on EU
accounting changes.
The ministry said on Tuesday the country is committed to
cutting its 2011 budget deficit to below 3 percent of gross
domestic product regardless of a decision in Brussels on a
proposed change in pension accounting rules. []
Economy Minister Gyorgy Matolcsy was also cited as saying
the deficit reduction could be achieved without austerity.
Hungary government bond prices reversed an early decline and
yields dropped back near three-week lows.
But the leu led gains in the region, rising 0.7 percent to a
September high around 4.23 to the euro. Five dealers said the
central bank was behind the move, with two estimating a tiny
100-150 million euros may have been sold. []
"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," a 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 available for comment.
CROWN PATH CLEAR
The crown -- central Europe's top performer with a 7 percent
gain this year and beating a 4 percent rise for the zloty --
broke 2010 highs around 24.630/620 per euro, which had provided
resistance for the past month.
Dealers said the crown has benefitted from increased foreign
demand for Czech bonds and treasury bills, which have dropped to
historic lows since June on government austerity pledges.
This has helped make the crown a safe haven currency in central
Europe when risk appetite is low.
The crown added 0.5 percent to 24.516 per euro by 1449 GMT.
"We are starting to move in one direction," a Prague FX
dealer said. "(The crown) is also getting good flow from the
(debt) papers market."
The Hungarian forint rose 0.6 percent and extended a fifth
straight session with gains after pledges to cut the deficit
last week. This has helped bonds but dealers said a further drop
of yields on secondary markets could be difficult.
"I don't think that yields could fall significantly
further," a trader said. "Much stronger (investor) confidence
would be needed for that, with the forint firmer than 280 or
even near 275."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.516 24.626 +0.45% +7.35%
Polish zloty <EURPLN=> 3.925 3.931 +0.15% +4.56%
Hungarian forint <EURHUF=> 281.34 282.98 +0.58% -3.91%
Croatian kuna <EURHRK=> 7.28 7.283 +0.04% +0.4%
Romanian leu <EURRON=> 4.231 4.259 +0.66% +0.15%
Serbian dinar <EURRSD=> 105.19 105.12 -0.07% -8.85%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +94bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +97bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +591bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +553bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +462bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 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 and
Jason Hovet; Editing by Ron Askew)
