Emerging FX-Czech, Slovak crowns lead sector surge

By Sujata Rao

LONDON, Nov 6 (Reuters) - The Czech and Slovak crowns raced to record highs on Monday, leading an emerging market rally fuelled by strong U.S. jobs data that reassured investors the world's largest economy is heading for a soft landing.

Gradually moderating U.S. growth and steady interest rates are positive for emerging markets which tend to be highly geared into global growth and the non-farm payrolls data on Friday showed unemployment at the lowest levels since 2001.

The biggest gains came in central Europe though the Turkish lira and South African rand were also trading close to recent multi-month highs. The Czech crown touched an all-time high of 27.88 per euro <EURCZK=> while the Slovak crown hit a record of 36.150 per euro <EURSKK=>.

"It's the momentum, it's a global phenomenon, not something specific to the Czech and Slovak crowns. The risk premium is diminishing.. as U.S. rates have peaked and euro zone rates are predictable and in such an environment central Europe looks very positive," said Nigel Rendell, emerging markets strategist at Calyon in London.

"People have interpreted the U.S. data as saying the U.S. economy is doing okay and there is no reason to be negative on emerging markets so they are stepping in to buy," he added.

The Polish zloty which had led the charge on Friday afternoon, firmed 0.6 percent to 3.816, the highest level in almost six months though the forint stayed near flat at 259.68 <EURHUF=>. A trader in London said stops were triggered on the Slovak and Czech crowns while the zloty, having convincingly broken 3.84, looked set to test higher.

"Any (euro) rallies are getting sold into heavily," he said.

The forint, seen as a typical counter-cyclical currency, tends to underperform its peers in an environment of good risk appetite but traders expected it to get a boost from the sector's general positive momentum <EURHUF=>.

"Since the U.S. non-farm payrolls on Friday we have seen a flight to emerging markets, " the trader said. "People are thinking the U.S. is in a better state and they have become less risk-averse.... all the major EM currencies, the rand, Turkish lira and the Mexican peso all have rallied well since the data."

DOLLAR CROSSES

A stronger greenback somewhat curbed enthusiasm on the dollar crosses, especially on rand which came up against resistance in its bid to push higher. The currency pulled back 0.2 percent after a 1 percent rally on Friday ZAR=d3>.

The lira had received a boost of its own on Friday from better-than-expected inflation data that analysts said showed the disinflation process was well and truly underway, heralding an end to the rate rise cycle.

The lira surged over 2 percent at one point on Friday to a two-month high of 1.4385 per dollar <TRY=> before paring gains by close. It firmed 0.25 percent on Monday to 1.45 per dollar while the benchmark lira bond yield dipped to 21.28 percent from Friday's 21.87 percent close.

Turkish equities rallied about 0.75 percent <.XU100>.

"The stronger dollar globally is a bit of an impediment to the dollar crosses," said Lucy Bethell, emerging markets strategist at the Royal Bank of Scotland. "Central Europe is having a nice day as the breaks from ranges in forcing people to sell euros but the dollarcrosses are not doing that well."

She forecast the rand to gradually inch up to 7.10/7.15 against the dollar, thanks to the better global backdrop and last week's benign South African trade numbers.

((Reporting by Sujata Rao London newsroom +44 20 7542 6176 sujata.rao@reuters.com; editing by David Christian-Edwards))

Keywords: MARKETS EMERGING FOREX

 CURRENCY                LATEST    PREV   LOCAL    LOCAL   
                                   CLOSE  CURRENCY CURRENCY 
                                          PCT CHG  PCT CHG 
                                                   IN 2006 
 EUROPE/MIDDLE EAST/AFRICA 
 Czech Rep.   <EURCZK=>   27.86     27.95   +0.33    +4.35 
 Poland       <EURPLN=>    3.82      3.84   +0.55    +0.64 
 Hungary      <EURHUF=>  258.91    259.83   +0.36    -2.55 
 Slovakia     <EURSKK=>   36.15     36.27   +0.32    +4.65 
 Romania      <EURRON=>    3.51      3.52   +0.22    +4.88 
 Ukraine      <UAH=>       5.04      5.05   +0.02    +0.02 
 South Africa <ZAR=>       7.38      7.37   -0.16   -14.49 
 Kenya        <KES=>      71.75     71.75   +0.00    +0.84 
 Israel       <ILS=>       4.31      4.29   -0.39    +6.87 
 Turkey       <TRY=>       1.44      1.45   +0.44    -6.44 
  
 LATAM 
 Mexico       <MXN=>      10.80     10.81   +0.07    -1.64 
 Brazil       <BRL=>       2.14      2.14   +0.16    +9.40 
 Venezuela    <VEB=>    2144.60   2144.60   +0.00    +0.00 
 Chile        <CLP=>     524.50    525.50   +0.19    -1.99 
  
 ASIA 
 Singapore    <SGD=>       1.57      1.56   -0.20    +6.11 
 Hong Kong    <HKD=>       7.78      7.78   -0.07    -0.37 
 Indonesia    <IDR=>      9,132     9,100   -0.35    +7.48 
 China        <CNY=>       7.88      7.87   -0.05    +2.45 
 Thailand     <THB=>      36.72     36.73   +0.04   +11.71 
 Philippines  <PHP=>      49.92     49.67   -0.50    +6.13 
 Taiwan       <TWD=>      32.93     32.91   -0.07    -0.53 
 South Korea  <KRW=>      0,942     0,937   -0.56    +6.93 
 India        <INR=>      44.90     44.76   -0.31    +0.16 
  
 For full regional quote listings, double click on the following codes: 
 Africa <AFFX1=> 
 Asia <ASIAFX=> 
 Central/Eastern Europe <EEFX=> 
 Latin America <LATAMFX=> 
 Middle East <MEFX=> 
    
  Keywords: MARKETS EMERGING FOREX  pl cz sk za tr