* Stocks rally, giving FX support
* Polish c.bank seen cutting 25 bps
* But view grows Polish rates could stay on hold
* Analysts say FX weakening trend still near
(Adds details, fixed income, byline)
By Jason Hovet
PRAGUE, Feb 25 (Reuters) - Central European currencies
firmed on the back of a rally in global markets on Wednesday,
with the Polish zloty edging up before an expected quarter
percentage point interest rate cut later in the day.
Stocks jumped more than 2 percent, relieving some pressure
from the region's hard-hit currencies, after Wall Street rallied
when Fed chairman Ben Bernanke said nationalisation of big banks
was not being planned. []
"The whole region is strengthening as optimism came back on
the global market," said one Warsaw-based dealer.
The zloty <EURPLN=> rose 0.4 percent to bid at 4.629 to the
euro by 1022 GMT. Hungary's forint <EURHUF=> rose 0.6 percent to
299.68 per euro and the Czech crown <EURCZK=> gained 0.8 percent
over Tuesday's domestic close.
The stronger currencies helped lift bonds, with Hungarian
yields dropping for the moment.
"The market is biased toward weakening (in bond prices) , so
I think a major correction is not out of the question," a
Budapest dealer said.
Romania's leu <EURCZK=> added 0.1 percent to gains from the
previous session when dealers said the central bank looked to
intervene.
Central and eastern Europe has been hard hit by the global
economic crisis, with sinking growth outlooks and worries over
many countries' foreign credit exposure hammering currencies
this year.
Policymakers have been at pains to point out differences in
their respective countries. A Standard & Poor's report this week
said the Czech Republic, Poland and Slovakia were better
positioned to weather the global slowdown. []
On Tuesday, Romania's finance minister said his country may
seek a protective EU/IMF deal even if extra cash were not
necessarily needed. []
EASING THE SLIDE
Regional central bankers launched on Monday a joint push to
support their currencies that sank to multi-year or record-lows
in the past week, saying their sharp drop did not reflect their
economic fundamentals and was overdone. []
Analysts have said falling interest rates have intensified
the markets' slide. On Monday, Hungary left its interest rates
unchanged, while investors were looking to a Polish central bank
meeting later on Wednesday where analysts also expected a
slowing to its sharp easing in previous months. []
"It remains to be seen whether these moves are sufficient to
avert a slowdown but we think that at this stage the central
bank will be more interested in restoring stability on financial
markets and the currency market in particular," TD Securities
wrote in a note, joining other analysts that held out the view
that rates could stay unchanged.
The joint central bank action had temporarily boosted
currencies that have swung widely in the previous week. On
Wednesday, currencies were mostly a touch up from closing levels
seen on Feb. 13, but still down 5-12 percent in 2009.
Strategists have said more weakening is likely in the first
half of this year. SEB bank said on Tuesday the recent gains are
a good opportunity to enter short positions. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.227 28.438 +0.75% -5.22%
Polish zloty <EURPLN=> 4.629 4.648 +0.41% -11.1%
Hungarian forint <EURHUF=> 297.68 299.41 +0.58% -11.47%
Croatian kuna <EURHRK=> 7.453 7.547 +1.26% -1.18%
Romanian leu <EURRON=> 4.274 4.276 +0.05% -6.07%
Serbian dinar <EURRSD=> 94.39 94.069 -0.34% -5.2%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +25 basis points to 240bps over bmk*
4-yr T-bond CZ4YT=RR -21 basis points to +237bps over bmk*
8-yr T-bond CZ8YT=RR -11 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -18 basis points to +1165bps over bmk*
5-yr T-bond HU5YT=RR -19 basis points to +1033bps over bmk*
10-yr T-bond HU10YT=RR -23 basis points to +842bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1123 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Victoria Main and Toby Chopra)
