* Regional growth outlook darkens
* Currencies up on Hungarian intervention rumour
* Recent rally a short correction rather than trend reversal
* Markets await more news on potential Romanian aid package
* Hungary, Czech currencies shrug off GDP data
(Adds detail, quotes)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, March 11 (Reuters) - Central European
currencies defied a darkening regional outlook on Wednesday,
with Poland's zloty and Hungary's forint leading gains and
helping the Czech crown almost erase this year's losses.
Fresh economic data showed the region, now severely hurt by
the global financial crisis, entered a sharper downturn than was
thought just weeks ago, with recession knocking on most doors
[].
But market players stayed wary that Hungarian policymakers
could be intervening to prop up the battered forint after
central bank Governor Andras Simor indicated on Tuesday the bank
may have sold euros from its reserves or shifted government EU
funds through the market.
Regional markets also drew support from a globally better
sentiment, with stocks rising on bank hopes [].
Romania's leu <EURRON=> was mostly stable, and dealers said
markets were awaiting more details on a potential IMF-led
bailout package a day after the government asked for
international aid to avoid a financing crisis.
On Tuesday, the forint leapt about 1.8 percent, pulling the
Polish zloty and the Czech crown higher. The crown <EURCZK=>
briefly clawed back its losses this year to break even at 26.69
per euro before sliding back to around 26.96 by 1413 GMT.
"There is a bit of speculation that the Hungarians are
intervening but I don't think that is the case. People are
talking about it ... but the locals don't seem to think so," a
London-based dealer said.
The forint <EURHUF=> stabilised towards the end of the
domestic session, trading at 299.4 per euro.
"We are at a psychological level at 300 forints to the
euro," one dealer said. "Hedge funds may want to see it weaker,
the central bank wants it stronger, and we're moving sideways."
"Unless the central bank directly intervenes, significant
moves are unlikely," he added.
Analysts warn this week's rally is likely to be short-lived,
as the region has not yet seen the worse of the financial crisis
and plunging economic activity as well as mounting worries about
external financing will create more damage.
Czech and Hungarian growth data for the fourth quarter were
worse than preliminary estimates. Czech growth was revised down
to 0.7 percent on an annual basis, while Hungary contracted 2.3
percent.
Poland's finance minister was more bullish, saying growth
would be between 1.7 and 3.7 percent in 2009, a more optimistic
outlook than the market consensus [].
Although Poland's forecasts shape up better than its peers',
the central bank will continue to cut rates to support growth,
its governor said [].
The unit <EURPLN=> -- seen by analysts as a proxy for
central and eastern Europe as Poland's currency market is larger
than its peers -- gained 1.8 percent to 4.589 per euro.
Dealers said the zloty was likely to follow global markets
for the time being, but has lost almost about a third of its
value since hitting record highs last summer.
The reversal has hit companies with currency options and
forward or swap contracts, and the financial regulator said
losses totalled $5 million as of mid-February. []
Romania and Hungary released February inflation data above
expectations, strengthening expectations for interest rates to
remain flat in Romania and be hiked in its western neighbour.
Dealers have said the leu, which has been relatively stable
compared to its peers over the past weeks, could be moved
near-term only be the announcement of the amount Romania plans
to get from the EU, IMF and other financial institutions.
Bond markets also benefited from improving global sentiment,
despite worse than expected GDP data, while in Hungary, talk of
a reversal of the rate easing cycle did not impress investors.
"Monetary policy has its limits," one trader said. "A rate
hike is not some magic weapon."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.96 27.098 +0.51% -0.77%
Polish zloty <EURPLN=> 4.589 4.671 +1.79% -10.33%
Hungarian forint <EURHUF=> 299.4 304.76 +1.79% -11.97%
Croatian kuna <EURHRK=> 7.419 7.438 +0.26% -0.73%
Romanian leu <EURRON=> 4.279 4.284 +0.12% -6.18%
Serbian dinar <EURRSD=> 94.368 94.25 -0.13% -5.18%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 227bps over bmk*
4-yr T-bond CZ4YT=RR -28 basis points to +240bps over bmk*
8-yr T-bond CZ8YT=RR -45 basis points to +277bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +432bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +380bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +315bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -23 basis points to +1160bps over bmk*
5-yr T-bond HU5YT=RR -25 basis points to +1036bps over bmk*
10-yr T-bond HU10YT=RR -31 basis points to +843bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1613 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
and Marius Zaharia, Editing by Ron Askew)
