(Updates throughout, changes dateline)
BUDAPEST, Sept 8 (Reuters) - Central Europe's emerging
currencies retreated on Monday after an early rally as the
dollar recovered ground and investors turned their focus to the
region's deteriorating economic fundamentals.
The Polish zloty <EURPLN=> which rose nearly 1.5 percent in
early trade, ended the day in the red after the government
lowered its 2009 growth forecast. Analysts said the new
projection was still optimistic considering Europe's slowdown.
The zloty, along with others in the region, was also hurt by
a bounce for the dollar against the euro, as markets turned
positive on the U.S. government's bail out of mortgage finance
firms Fannie Mae and Freddie Mac.
"The zloty is closely following the EUR/USD performance,
hurt by the strengthening dollar," analysts from Poland's Bank
BPH said in a note.
"Financial markets currently seem to believe in a scenario
of the U.S. economy recovering and euro zone entering a
recession."
The Czech crown <EURCZK=>, which was broadly unchanged in
early trade, slipped as lower-than-expected August inflation
data added to expectations of further monetary policy loosening
next year.
The easing bias kept the currency locked around 24.900 per
euro but the unit was unable to break above the 25.00 level.
"The recurring strengthening of the dollar led to (a
further) sell-off in central European currencies, including the
Czech crown," Jan Vejmelek, an analyst at Komercni Bank, said in
a note.
The Hungarian forint, <EURHUF=> which has been vulnerable
recently due to domestic political turmoil, was the day's best
performer with a 0.52 percent gain. But it failed to hold below
the 240 level, a key psychological barrier.
Weak foreign trade data released on Monday indicated that
the wider economic slowdown is already taking its toll but
analysts said that political uncertainty keeps the risk of
monetary loosening fairly low.
Romania's leu <EURRON=> was also trading stronger as
positive core market sentiment lifted the currency.
-----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.935 24.915 -0.08% +5.91%
Polish zloty <EURPLN=> 3.471 3.458 -0.37% +3.74%
Hungarian forint <EURHUF=> 241.43 242.69 +0.52% +4.54%
Croatian kuna <EURHRK=> 7.13 7.133 +0.04% +2.68%
Romanian leu <EURRON=> 3.588 3.606 +0.50% -0.25%
Serbian dinar <EURRSD=> 76.59 76.62 +0.04% +2.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -7 basis points to 2bps over bmk*
5-yr T-bond CZ5YT=RR +4 basis points to +23bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +39bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +229bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +220bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +197bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +514bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +480bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +387bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1632 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Balazs Koranyi,
editing by Patrick Graham)
