(Adds fixed income, Polish c.bank governor's comment)
WARSAW, Feb 4 (Reuters) - The Polish zloty fell to a fresh
4-1/2 year low on Wednesday due to a sharp selloff by foreign
investors, and the Hungarian forint hit a record low to lead
further weakness in emerging European currencies.
At 0930 GMT the zloty <EURPLN=> was almost 2 percent down
against the euro while the forint <EURHUF=> was 0.4 percent
weaker after hitting the all-time low of 304 per euro.
The Czech crown <EURCZK=> was 0.3 percent weaker against the
common currency.
"The fate of the zloty is definitely in the hands of foreign
investors as domestic ones are completely inactive," a
Warsaw-based dealer said.
Central European currencies have been hammered in 2009, hit
by still-high risk aversion, darkening outlooks for the region's
export-heavy economies and falling interest rates.
In Hungary, whose currency fell to the weak side of 300 per
euro for the first time ever on Tuesday, dealers said volatility
remained high in a shallow market.
"It's just very volatile with really wide spreads and wild
swings," a Budapest-based dealer said. "We firmed to 299 then
jumped right up to 303."
Despite sharp currency depreciation there are no signs that
the central banks of Hungary and Poland are aiming to intervene
on the foreign exchange market.
"We are in consultations on the issue (of forex
intervention) with the Monetary Policy Council but it seems
there's no need to intervene for now," Polish central bank
governor Slawomir Skrzypek told public television.
[]
Elsewhere in the region, the leu <EURRON=> also softened
against the euro but dealers said the Romanian currency was
pushed down by expectations of an interest rate cut.
Romania's central bank is expected to cut rates for the
first time in 19 months on Wednesday to protect the strained
economy, with analysts nearly halving their 2009 growth
forecasts over the last month.
Ten out of 17 analysts surveyed expect the central bank to
cut rates, now the highest in the European Union, to ease the
cost of borrowing as external sources of cash dry up for local
businesses and consumers.
The bond market weakened in Poland on Wednesday, while in
the Czech Republic it remained steady as markets awaited the
central bank's policy decision on Thursday.
Markets expect a half percentage point cut to bring the main
Czech rate equal to its historic low of 1.75 percent, but
currency weakness could prove an obstacle to future moves. The
bank is scheduled to unveil for the first time FX forecasts.
"We expect that the currency is now much weaker than they
expected at their (last) meeting in December, and looking set
for further weakness," Komercni Banka fixed income trader
Dalimil Vyskovsky said. "This suggests future rate cuts could be
smaller than previously expected and that we might be slightly
overdone again on the 2-3Y (IRS) segment, despite the recent
performance in PRIBOR fixings."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.555 28.477 -0.27% -6.31%
Polish zloty <EURPLN=> 4.688 4.595 -1.98% -12.22%
Hungarian forint <EURHUF=> 300.22 299.24 -0.33% -12.21%
Croatian kuna <EURHRK=> 7.395 7.381 -0.19% -0.41%
Romanian leu <EURRON=> 4.314 4.298 -0.37% -6.94%
Serbian dinar <EURRSD=> 92.821 94.24 +1.53% -3.6%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 98bps over bmk*
4-yr T-bond CZ4YT=RR -9 basis points to +95bps over bmk*
8-yr T-bond CZ8YT=RR -4 basis points to +115bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +374bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +248bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +249bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +928bps over bmk*
5-yr T-bond HU5YT=RR +9 basis points to +879bps over bmk*
10-yr T-bond HU10YT=RR +13 basis points to +683bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0930 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
editing by David Stamp)
