WARSAW, July 27 (Reuters) - Central European currencies were
stronger in early trade on Monday, extending last week's gains,
and positive market sentiment continued to support further
strength ahead of rate-setting meetings in the region this week.
The zloty <EUROPLN=) was 0.6 percent up since Friday's close
against the euro, the Hungarian forint <EURHUF=> was up 0.5
percent, while the Czech crown <EURCZK=> roughly stable.
The zloty hit its strongest level last week since
mid-January, helped by the growing global risk appetite and also
comments from the statistics office, forecasting growth levels
significantly higher than market expectations.
The improvement in sentiment in Poland was building for much
of July, when a series of better-than-expected macroeconomic
data were released, such as industrial output and retail sales,
prompting even the most dovish central bankers to say rates
would stay unchanged for months to come.
Other central European currencies have also been gaining in
recent days, in line with stocks and bonds, as appetite for risk
grew and financing conditions improved after successful taps
into international markets by Poland and Hungary.
Warsaw's <> and Bucharest's <> stock markets hit
nine-month highs.
"The zloty has been the laggard in CEE currencies for some
time. We have been advising investors to look into zloty upside
for a few months now, based on the fact that the Polish economy
is expected to fare better than the regional counterparts," said
Roderick Ngotho, EMEA strategist at UBS in London.
"The market seems to have woken up to the view that zloty
looked cheap compared to currencies backed by poorer
fundamentals such as Hungary's forint. We should see the zloty
show better upside in risk appetite sessions than has been the
case for many months."
Even talk of Deputy Prime Minister Waldemar Pawlak, whose
protectionist PSL party is in a coalition government with Prime
Minister Donald Tusk's Civic Platform (PO), who said next year's
presidential election could bring change to the alliance, failed
to dent investors' positive sentiment.
For the region as a whole, investors also shrugged off
EBRD's warning from last Friday that the region may not return
to high growth rates and record investment levels it enjoyed
before the global crisis began to take its toll. []
Investors now awaited the Hungarian central bank rate
decision later on Monday as well as the U.S. new home sales data
for June.
"On the chart 264 looks like a strong support so it may even
firm there," a currency dealer said. "The forint continues to
drift in the world, where sentiment is very supportive and
interest rates are also high."
On Wednesday, the Polish central bank is also due to make
its monthly rate decision, but it is widely seen holding fire
and dealers said this may have little if any impact on the
markets.
A Reuters poll of analysts showed last week Hungary's
central bank would cut rates by 50 basis points as consolidation
in the country's markets has opened room for trimming the
highest rate in the EU. []
Analysts and dealers say the positive sentiment may stay a
while, although they admit risks remain.
They say market players were aware of possible trouble in
Latvia, a dark cloud hanging over the region's markets, but that
for now a significant part of the risk was already priced in.
The International Monetary Fund (IMF) has withheld a payment
of 200 million euros ($285 million) as part of a joint 7.5
billion euro package largely funded by the EU after Latvia
refused to make further state pension cuts and tax increases.
Latvia, the European Union country worst hit by the
financial crisis, has already made savage public sector pay and
benefits cuts. Its economy is expected to contract 18 percent
this year.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.452 25.454 +0.01% +5.11%
Polish zloty <EURPLN=> 4.166 4.189 +0.55% -1.22%
Hungarian forint <EURHUF=> 265.98 267.24 +0.47% -0.91%
Croatian kuna <EURHRK=> 7.315 7.308 -0.1% +0.68%
Romanian leu <EURRON=> 4.197 4.209 +0.29% -4.35%
Serbian dinar <EURRSD=> 92.85 92.96 +0.12% -3.63%
All data taken from Reuters at 0908 CET.
Currency percent change calculated from last Friday's domestic
close at 1635 CET.
(Reporting by Reuters bureaus, writing by Karolina Slowikowska;
Editing by Toby Chopra)
