* Risk aversion up on Greece, Obama
* Hungary announces election, cbank meeting set to cut rates
(Recasts with comments, prices)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, Jan 22 (Reuters) - Currencies in Central
Europe tracked world stocks lower on Friday with worries over
Greece and new U.S. bank restrictions overshadowing the launch
of the first of a string of national election campaigns.
Hungary will hold two rounds of voting starting on April 11,
the first in a series of polls that may affect spending and
budgets across the ex-communist region. []
Analysts are particularly concerned in Hungary by the lack
of clarity over the economic policy programme of opposition
party Fidesz, which has issued some dire warnings on the reality
of the country's budget situation and is expected to win.
That and the economic outlook for the region as Germany's
economy shows signs of slowing, are expected to dominate coming
months, though dealers said the global mood would set the tone
in local markets in the short term.
The forint <EURHUF=> eased only 0.2 percent to the euro by
1503 GMT, while the Czech crown <EURCZK=> eased 0.6 percent and
the zloty <EURPLN=> and the leu <EURRON weakened by 0.4 percent.
"Central European markets have still weathered the Greek
impact quite well so far," one Budapest-based fixed income
trader said. "We will see whether Greece has any measures to
publish over the week-end."
Hungary's central bank (NBH) is expected to cut its 6.25
percent base rate further by 25 basis points on Monday to help
the recession-marred economy, despite a wobbly start to 2010 for
the forint.
With a 1.7 percent fall the Hungarian unit was the biggest
loser this week in the region as Greece's financial problems
highlighted its own vulnerability due to a high debt burden,
which forced it to reach out to the IMF for aid in 2008.
DEBT, STOCKS
Government bonds remained under pressure, mainly long-dated
papers, although price falls slowed from earlier this week.
The region's stock markets pulled back further from
multi-month highs and followed global peers lower after U.S.
President Barack Obama proposed new restrictions on banks that
spurred sales of riskier assets. []
Prague stocks <> lost the most with a 2.7 percent fall
after hitting a 15-month high earlier this week.
One Stockholm-based Central European dealer said some
investors were still holding positions betting on renewed
appreciation of emerging European currencies in the weeks ahead,
especially the zloty, which was at a year high this week but
failed to break below the 4 per euro level.
"The euro/zloty is still a favourite trade, but if this
panic gets (bigger), some more people will run for the door,"
the dealer said.
Danske Bank said in its weekly regional note that a bigger
sell-off was a clear risk, while it recommended selling the
forint for the zloty based on Poland's better fundamentals.
Analysts expect the Hungarian central bank to cut its key
rate by 5.5 percent from 6.25 percent by the middle of the year.
In Poland and the Czech Republic, debate has turned to how
soon interest rates could rise. Czech interest rate swaps rose
this week after central banker Robert Holman said a hike could
come already in the second quarter. []
"Front (of the) curve now seems to be pricing the first hike
as soon as in May (70%), and some 100bp of hikes are priced
until the end of 2010, which seems a bit too much to us,"
Komercni Banka dealers said in a note.
Czech and Polish central bank rates stand at record lows, at
1.0 and 3.5 percent, respectively.
"In Poland, despite an unchanged decision (next week), we
expect a shift in rhetoric to a slightly more hawkish bias,"
Danske said.
In Poland, just like in Hungary, the yield curve steepened
in the past week, though Hungarian data showed some government
bond buying by foreign investors this month.<.HUBONDHOLD>
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.208 26.063 -0.55% +0.42%
Polish zloty <EURPLN=> 4.103 4.086 -0.41% +0.02%
Hungarian forint <EURHUF=> 272.05 271.52 -0.19% -0.62%
Croatian kuna <EURHRK=> 7.291 7.291 0% +0.25%
Romanian leu <EURRON=> 4.151 4.133 -0.43% +2.08%
Serbian dinar <EURRSD=> 97.37 97.14 -0.24% -1.53%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -12 basis points to 80bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +142bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +130bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +333bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +291bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +558bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +506bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +459bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1603 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet/Sandor
Peto; Editing by Patrick Graham)
