* Fx firm as zloty highest since Dec. 6, past 4.0/euro
* Polish CPI maintains rate increase expectations
* Forint firms, market prices in further rate rise
* Crown eases, cbanker sees looser policy possible
(Adds Polish CPI, new comments details)
By Marius Zaharia and Sandor Peto
BUCHAREST/BUDAPEST, Dec 14 (Reuters) - Central European
currencies mostly firmed on Tuesday as Polish inflation figures
reinforced expectations the central bank rate will raise
interest rates early in 2011.
Hungary's central bank is also expected to tighten monetary
policy further, while the Czech crown continued to weaken after
a central banker said looser policy was a possibility.
The Polish zloty <EURPLN=> remained above the key technical
and psychological level of 4.0 to the euro, and after briefly
hitting a one-week high at 3.977 to the euro it was bid at 3.987
at 1437 GMT, 0.3 percent higher from Monday.
Hungary's forint <EURHUF=> and the Romanian leu <EURRON=>
both gained 0.1 percent, to 276.35 and 4.286 respectively, while
the Czech crown <EURCZK=> shed 0.2 percent to 25.162 per euro.
Poland reported 2.7 percent annual inflation for November, a
tick below analysts' 2.8 percent forecast but above the central
bank's target. []
"This data allows the MPC (central bank rate-setting panel)
to keep rates unchanged this month, but we can expect a rate
increase early next year," said Rafal Benecki, senior economist
at ING Bank Slaski in Warsaw.
Poland's key interest rate has stood at a record low 3.5
percent for 17 months.
POLAND, HUNGARY SEEN RAISING RATES
Analysts polled by Reuters before the inflation figures had
forecast that borrowing costs would remain flat until the end of
2010, while the forward rate agreements (FRA) <PLNFRA> fully
price in a 50 basis point increase in the next three months.
Hungarian FRAs price in the same amount of tightening for
that period after last month's surprise quarter percentage point
lift to 5.5 percent and Tuesday's comments from central bank
(NBH) governor Andras Simor did not change that, traders said.
Simor told the Wall Street Journal that one interest rate
hike would not be enough to get inflation back on target, but
that not "many" steps were needed in a tightening cycle that
began last month. []
The forint dipped after the European Central Bank warned
Hungary's government to respect the independence of the NBH, but
quickly recovered. The ECB said planned changes to the central
bank law that would allow the government to appoint four of
seven rate-setters next year, coupled with government criticism
of the bank, could be seen as an attempt to influence its
policymaking. []
Hungarian government bonds gave up some ground but yields
were still lower by 6-7 basis points from Monday.
Their yields have fallen by 40-60 basis points from 15-month
highs hit late last month, but they look attractive enough to
generate sufficient demand close to current levels at Thursday's
primary auctions <HUISSUE>, one trader said.
"Comments from (Economy Mimnister Gyorgy) Matolcsy (on some
planned savings measures []) still lacked details,"
the trader said. "What is left for the rest of the year is that
the market watches whether Fitch will downgrade Hungary."
Concerns the government's unorthodox measures will leave
Hungary's budget unsustainable, and that the euro zone debt
crisis will spill over into its eastern neighbours have caused
jitters in Hungarian and regional markets. []
Czech central bank Vice-Governor Mojmir Hampl told Reuters
that downside risks from the euro zone crisis to the central
bank's outlook were increasingly likely to accumulate and
policymakers could loosen monetary policy. []
Dealers in Prague said the crown should remain in a
weakening bias for the rest of the year as investors square
positions and buy euro/crown. The unit had gained more than 7
percent this year but has lost 2.7 percent since November.
"It makes sense, since we haven't really seen any correction
for the last year and a half," a Prague-based dealer said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.162 25.107 -0.22% +4.59%
Polish zloty <EURPLN=> 3.987 3.999 +0.3% +2.93%
Hungarian forint <EURHUF=> 276.35 276.7 +0.13% -2.17%
Croatian kuna <EURHRK=> 7.402 7.405 +0.04% -1.25%
Romanian leu <EURRON=> 4.286 4.289 +0.07% -1.13%
Serbian dinar <EURRSD=> 105.3 106.61 +1.24% -8.95%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -7 basis points to 76bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +76bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +80bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -9 basis points to +641bps over bmk*
5-yr T-bond HU5YT=RR -10 basis points to +574bps over bmk*
10-yr T-bond HU10YT=RR -9 basis points to +490bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1537 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia/Sandor
Peto; Editing by Catherine Evans)
