* Currencies fall from session highs
* Polish c.bank cuts rates by 25 bps as expected
* Analysts say FX weakening trend still near
(Recasts with Polish rate cut)
By Jason Hovet
PRAGUE, Feb 25 (Reuters) - The zloty gave up early gains on
Wednesday after the Polish central bank cut interest rates by a
quarter of a percentage point, and central European currencies
slipped from session highs.
Poland's central bank cut its main rate to 4.0 percent as
expected, but the cut was lower than three previous moves that
had reduced the base rate by a total 175 basis points.
[]
Falling interest rates have intensified a deep slide in
emerging European currencies, analysts have said, and many
expect a pause in many of the region's easing cycles to ensure
financial stability.
Hungary left rates unchanged on Monday.
The zloty <EURPLN=> dipped 0.2 percent on the day to bid at
4.655 to the euro by 1209 GMT. Hungary's forint <EURHUF=> was
steady at 299.54 per euro and the Czech crown <EURCZK=> gained
0.6 percent over Tuesday's domestic close.
"The (Polish) Council probably took into account not only
slowing growth but also the sharp recent weakening of the zloty,
this likely limited (the case for) a deeper cut," said Monika
Kurtek, a senior economist with Bank BPH.
"Deeper interest rate cuts would run counter to recent moves
of the government and the central bank to strengthen the zloty."
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. []
On Wednesday, currencies found some early relieve from
stocks, which gained more than 2 percent after Wall Street
rallied when Fed chairman Ben Bernanke said nationalisation of
big banks was not being planned. []
The joint central bank action had temporarily boosted
currencies that have swung widely in the previous week. On
Wednesday, currencies were mostly even with 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. []
The stronger currencies have 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 0.2 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. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.277 28.438 +0.57% -5.39%
Polish zloty <EURPLN=> 4.655 4.648 -0.15% -11.6%
Hungarian forint <EURHUF=> 299.54 299.41 -0.04% -12.02%
Croatian kuna <EURHRK=> 7.387 7.547 +2.17% -0.3%
Romanian leu <EURRON=> 4.268 4.276 +0.19% -5.94%
Serbian dinar <EURRSD=> 94.16 94.069 -0.1% -4.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 212bps over bmk*
4-yr T-bond CZ4YT=RR -20 basis points to +239bps over bmk*
8-yr T-bond CZ8YT=RR -10 basis points to +306bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -17 basis points to +1166bps over bmk*
5-yr T-bond HU5YT=RR -18 basis points to +1034bps over bmk*
10-yr T-bond HU10YT=RR -21 basis points to +845bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1312 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 Chris Pizzey)
