PRAGUE, Oct 17 (Reuters) - Hungary's forint and Poland's
zloty gained ground against the euro on Friday but came off
morning highs after a dip in stocks, with the forint still
finding support from measures to shore up the country's banks.
The forint <EURHUF=> was bid at 266.22 against the euro by
0851 GMT, below opening levels but up 0.9 percent from
Thursday's domestic close. The Polish zloty <EURPLN=> was up 0.7
percent to 3.561 per euro.
Hungary has been exposed to larger currency swings than its
regional peers due to high levels of domestic lending in foreign
currencies, which raised funding concerns for banks and pushed
authorities to take measures to bolster the system.
"Hungary is still in a very shaky situation, a very
vulnerable situation," said Ulrich Leuchtmann, head of foreign
exchange research at Commerzbank in Frankfurt.
"Eastern European currency markets are driven currently by
many of the same factors driving equity markets," he added.
Regional stock markets rose early on Friday but quickly cut
gains as U.S. futures pointed to a negative open, dealers said.
Central European markets have swung widely this week,
falling recently as concerns over economic growth and Hungary's
banking sector intensified.
Central Europe had stayed mostly out of the firing line of
the year-old global credit crunch until recently, with
governments now introducing precautionary steps and slashing
growth forecasts as euro zone demand wanes [].
On Thursday, the Hungarian central bank took help from the
European Central Bank to add euro liquidity to the market,
helping to steady the currency.
The country's prime minister also said on Friday that he
would propose measures by next week to ease exchange rate risks
related to household borrowing [].
"There is still a lot of volatility; this calm is very
fragile," a Budapest currency trader said.
Elsewhere, the Czech crown <EURCZK=> edged down to 25.04 to
the euro. Romania's leu <EURRON=>, which has tracked forint
moves as many investors link the two countries because of their
large external imbalances, added 1.6 percent to 3.74 per euro.
Many analysts said weakening pressures on the leu have been
reduced by central bank's comments that it is ready to counter
high exchange rate volatility, which made some investors fear
future potential interventions.
Bonds remained out of favour with regional markets virtually
frozen from a lack of demand even after steps this week from
Hungary and the Czech Republic to boost domestic bond markets.
Hungary's central bank offered to buy a total of 50 billion
forints ($273.7 million) worth of government bonds at an auction
on Friday, based on a deal signed with primary dealers on
Thursday to boost the market [].
Activity in more liquid Poland was muted.
"Polish bonds are slightly stronger, as well as German bunds
and global stocks. It is difficult to estimate how yields will
perform today as the (bonds) market hardly exists," said Marcin
Ziolkowski, a dealer at Millennium Bank in Warsaw.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.035 25.015 -0.08% +5.52%
Polish zloty <EURPLN=> 3.561 3.586 +0.70% +1.1%
Hungarian forint <EURHUF=> 266.220 268.500 +0.85% -5.29%
Croatian kuna <EURHRK=> 7.155 7.156 +0.01% +2.34%
Romanian leu <EURRON=> 3.737 3.799 +1.63% -4.38%
Serbian dinar <EURRSD=> 82.688 83.028 +0.41% -4.99%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 46bps over bmk*
5-yr T-bond CZ5YT=RR +1 basis points to +90bps over bmk*
10-yr T-bond CZ9YT=RR -32 basis points to +42bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -11 basis points to +345bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +282bps over bmk*
10-yr T-bond PL10YT=RR -13 basis points to +229bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1051 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Victoria Main)
