* Currencies fall from session highs
* Polish c.bank cuts rates by 25 bps as expected
* Analysts say FX weakening trend still near
(adds detail, quotes, fresh fixed income data)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Feb 25 (Reuters) - The zloty gave up gains
on Wednesday after the Polish central bank cut interest rates by
a quarter of a percentage point, and central European currencies
weakened 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.
[]
"The argument that likely prevailed ... was that a rate cut
would not harm the zloty. The Council cut rates to stimulate the
economy," said Piotr Kalisz of Citibank Handlowy. "The decision
may be negative for the zloty in the short-term."
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, even if central
banker Julia Kiraly said there were downside risks to economic
growth and a recession in 2010 as well [], while the
forint was expected to remain volatile [].
The zloty <EURPLN=> dipped 0.7 percent on the day to bid at
4.682 to the euro by 1209 GMT. The forint <EURHUF=> lost 0.3
percent, while the Czech crown <EURCZK=> gained 0.3 percent over
Tuesday's domestic close.
The zloty fell briefly after the rate cut, but rebounded
immediately in line with the region, which tracked the
euro/dollar cross. Later in the day, all currencies came under
pressure from a poor opening in U.S. markets.
"The zloty's weakening after their rate cut was moderate, it
was tracked by the forint, but the zloty has also rebounded
since then," a Budapest-based dealer said.
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. []
Recent currency gains have helped lift Hungarian bonds,
while in Poland yields were mostly flat.
"Yields have not changed much today ... as the decision from
our rate-setters came as no great surprise," said Marek Kaczor,
dealer at PKO BP in Warsaw.
Romania's leu <EURRON=> added 0.2 percent to gains from
Tuesday when dealers said the central bank looked to intervene.
The once-booming 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. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.355 28.438 +0.29% -5.65%
Polish zloty <EURPLN=> 4.682 4.648 -0.73% -12.11%
Hungarian forint <EURHUF=> 300.29 299.41 -0.29% -12.23%
Croatian kuna <EURHRK=> 7.386 7.547 +2.18% -0.28%
Romanian leu <EURRON=> 4.282 4.276 -0.14% -6.25%
Serbian dinar <EURRSD=> 93.589 94.069 +0.51% -4.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +13 basis points to 190bps over bmk*
4-yr T-bond CZ4YT=RR 0 basis points to +245bps over bmk*
8-yr T-bond CZ8YT=RR -11 basis points to +205bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +435bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +370bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +312bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +19 basis points to +1194bps over bmk*
5-yr T-bond HU5YT=RR +43 basis points to +1060bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +857bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1715 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)
