Emerging FX-Zloty losses curbed by early forint strength

By Daniel Bases

LONDON, Sept 27 (Reuters) - The Polish zloty fell on Wednesday in the wake of a new corruption scandal that threatens to bring down the country's minority government, although losses were limited by early strength in the Hungarian forint.

However, both currencies have now fallen after a report from the World Bank said European Union members in east Europe are failing to take advantage of booming economies to enact key reforms and put their fiscal houses in order. A surprise quarter percentage point increase in interest rates by the Czech central bank helped lift the crown against the euro while Poland's central bank, as expected, left interest rates unchanged.

Romania's central bank is also expected to leave rates unchanged later on Wednesday. The leu traded at 3.53 agianst the euro, up 0.15 percent on the day <EURRON=>.

"I think the World Bank report was the trigger for this quite small sell-off in the Hungarian forint. The zloty was already under pressure but politics and the World Bank report was felt there too," said Goran Farkas, emerging markets specialist at SEB in Stockholm.

The forint slipped 0.19 percent against the euro <EURHUF=> to 272.61 after initially trading as high as 272.13.

The zloty then lost the support it had gained from the forint and, under pressure from the World Bank report and the country's internal political problems, fell 0.46 percent against the euro to trade at 3.9751 <EURPLN=>.

The zloty came under fire after private television channel TVN showed aired a tape it says shows two meetings between ruling conservative deputy leader Adam Lipinski and opposition Self-Defence MP Renata Beger, where Lipinski is said to ask Beger what she wanted for switch sides.

The ruling conservativese of Prime Minister Jaroslaw Kaczynski are trying to build a new majority coalition after ditching the leftist Self-Defense party last week in a row over the budget and a decision to send troops to Afghanistan.

"If we do see the collapse of the Polish government, which seems quite inevitable at the moment in terms of early elections, we could see it hit 4. I think 4.01 is a key level in euro/zloty after which quite a few stop losses would be triggered by all those who are short," said Tania Kotsos, currency strategist at RBC Capital Markets in London.

POCKETS OF STRENGTH

The Czech crown cut its losses after the central bank raised its key policy rate, the two-week repo rate, by 25 basis points to 2.50, defying most analysts who expected no change until October.

The crown traded up 0.22 percent to 28.347 <EURCZK=>, having been as weak as 28.462 prior to the announcement.

Turkey's lira was the high flier of the day, rising approximately 1.25 percent as the currency strengthened to 1.49 against the U.S. dollar <TRY=>.

"Turkey is gaining, certainly the base rate decision this week, its attractive yield, new bonds and strong demand hitting the market and real money flows are going into it," said one trader at a U.S. bank in London.

Consumer inflation in South Africa rose 5.0 percent year on year in August, in line with expectations. This keeps intact expectations the central bank will raise interest rates later this year, perhaps by as much as 100 basis points.

The rand gained ground, rising 0.73 percent on the day to 7.58 against the U.S. dollar <ZAR=>.

((Reporting by Daniel Bases; Editing by Ian Jones; Telephone: +44 207 542 2464; e-mail: daniel.bases@reuters.com; Reuters Messaging: daniel.bases.reuters.com@reuters.net))

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=> 28.35 28.41 +0.22 +2.55 Poland <EURPLN=> 3.98 3.96 -0.50 -3.36 Hungary <EURHUF=> 273.47 272.12 -0.49 -7.73 Slovakia <EURSKK=> 37.43 37.38 -0.12 +1.07

Romania <EURRON=> 3.53 3.54 +0.12 +4.17 Ukraine <UAH=> 5.02 5.01 -0.11 +0.60 South Africa <ZAR=> 7.58 7.64 +0.71 -16.80 Kenya <KES=> 72.50 72.50 +0.00 -0.21 Israel <ILS=> 4.30 4.30 +0.19 +7.12 Turkey <TRY=> 1.49 1.51 +1.24 -9.55

LATAM Mexico <MXN=> 10.99 11.02 +0.21 -3.35 Brazil <BRL=> 2.19 2.18 -0.30 +6.65 Venezuela <VEB=> 2144.60 2144.60 +0.00 +0.00 Chile <CLP=> 537.70 538.10 +0.07 -4.40

ASIA Singapore <SGD=> 1.59 1.59 +0.06 +4.73 Hong Kong <HKD=> 7.79 7.79 -0.02 -0.44 Indonesia <IDR=> 9,205 9,210 +0.05 +6.63 China <CNY=> 7.90 7.91 +0.08 +2.08 Thailand <THB=> 37.52 37.50 -0.04 +9.33 Philippines <PHP=> 50.12 50.25 +0.26 +5.71 Taiwan <TWD=> 32.95 32.88 -0.19 -0.57 South Korea <KRW=> 0,943 0,944 +0.04 +6.78 India <INR=> 45.92 45.77 -0.33 -2.07

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 =2 xref