* Zloty surges to 9-month high on rate rise expectations
* Czech crown at 5-1/2 week high vs euro, more gain seen
* Hungary 5-yr CDS spread above 400 first time since June
* Forint underperforms, but demand for Hungary bills strong
(Adds new comments, fresh prices)
By Marton Dunai and Sandor Peto
BUDAPEST, Jan 6 (Reuters) - The Polish zloty firmed to
9-month highs against the euro on Thursday as investors bought
it against the Hungarian forint on expectations that Poland's
central bank may start a cycle of rate tightening soon.
The Czech crown <EURCZK=> remained in a firming mood after
breaching technical levels against the euro, but the forint
eased as Hungary opened its six-month European Union presidency
facing criticism over budget policy and press freedom.
Polish markets are closed on Thursday for a public holiday
but the zloty extended gains posted since its central bank
governor said on Wednesday it was time for interest rates to
move gradually higher. []
Governor Marek Belka was also quoted by Hungarian media on
Thursday as saying the central bank must watch inflation
expectations as economic growth accelerates. []
The zloty was mainly bought against the forint, and the
PLN/HUF pair <PLNHUF=R> rose to multi-month highs as a result.
"The zloty keeps gaining and the forint keeps edging lower,"
a dealer in Budapest said. "We might recoup some of those losses
later today but I don't see the EUR/HUF below 275, frankly."
The zloty <EURPLN=> gained 0.2 percent to 3.861 by 1117 GMT.
The forint <EURHUF=> slipped 0.1 percent to 275.65.
The Czech crown <EURCZK=> was bid at 5-1/2 week highs at
24.758, firmer by 0.2 percent and the Romanian leu <EURRON=>
strengthened by 0.1 percent to 4.259.
HUNGARY LIFTS AUCTION DESPITE CDS RISE
An international outcry over Hungary's new media law has
intensified along with criticism of fiscal policy measures taken
in 2010 as the country takes over the EU's rotating presidency.
The extra attention has not helped the forint.
"Hungary attracts much more attention due to its EU
presidency... and there had been uncertainty (over Hungarian
government policy) anyway," one Budapest-based currency dealer
said.
"We are continuously in the news and that's not necessarily
positive (for the forint)... but I don't expect a huge
weakening," the dealer added.
Hungary's 5-year credit default swap spreads showing the
cost of insurance against default rose above 400 for the first
time since June and were well above levels for other states in
the region.
Traders say, however, that Hungarian assets continue to be
propped up by abundant global liquidity, which has kept cash
flowing into emerging markets.
Hungary sold 60 billion forints ($286.1 million) worth of
12-month Treasury bills on Thursday at an auction, 10 billion
forints more than planned. The average yield dropped to 6.16
percent from 6.20 percent at an auction two weeks ago, and one
trader said foreign investors bought heavily at the auction.
Elsewhere, the Czech Republic posted an 11.8 billion crown
trade surplus in November, a touch below forecasts, which
analysts said was a sign of continued economic recovery.
The Czech crown was in a strengthening channel after
breaching its 50-day moving average at 24.89 against the euro
earlier this week. The move probably opened room for further
gains to the 24.714 level, KBC said in a note.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.758 24.8 +0.17% +0.98%
Polish zloty <EURPLN=> 3.861 3.872 +0.28% +2.51%
Hungarian forint <EURHUF=> 275.65 275.42 -0.08% +0.85%
Croatian kuna <EURHRK=> 7.398 7.375 -0.31% -0.24%
Romanian leu <EURRON=> 4.259 4.263 +0.09% -0.61%
Serbian dinar <EURRSD=> 106.2 106.2 0% -0.26%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -10 basis points to 85bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +82bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +94bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +648bps over bmk*
5-yr T-bond HU5YT=RR -1 basis points to +584bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +488bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1217 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai; Editing
by Patrick Graham)
