* Crown, zloty outperform as investors look for safer assets
* Leu gains as parlt OKs tight budget, crucial for intl aid
* Yields stable, pressure seen on 10-yr Polish bonds
(Adds bonds, comments, updates markets)
By Marton Dunai
BUDAPEST, Jan 15 (Reuters) - Most east European currencies
continued recent gains on Friday as the Czech crown and the
Polish zloty rode a technical rally while the leu benefited from
improved risk perception after Romania passed a tight budget.
The crown <EURCZK=> and the zloty <EURPLN=> outperformed as
a weakening global risk environment prompted investors to look
for safer assets in the region and both were moving past key
technical levels.
While the Hungarian forint <EURHUF=> remained flat, the
crown traded 0.5 percent higher after adding 0.8 percent on
Thursday, and the zloty gained 0.3 percent at 1014 GMT.
"We broke through some important levels and are heading
toward 25.85," a Prague-based dealer said of the crown. "We are
still watching the euro/dollar, which is under pressure."
A retreat in the recent global risk rally on Friday was
likely to hurt riskier assets but not sturdy economies like the
Czech Republic or Poland, Danske Bank said in a morning note.
"Signs of a weaker than expected recovery is likely to
trigger negative knee-jerk reactions for the more risk
susceptible markets such as Hungary," Danske analysts wrote.
"We remain positive on CZK rates and continue to recommend
receiving CZK against paying HUF."
Barring a heavy risk retreat, that could mean a rally in the
zloty as well as the crown.
"If the euro/dollar situation helps, euro/zloty could try to
break through the strong resistance level of 4.00," wrote Bank
BPH in a morning note.
Investors in Poland will also keep a close eye on November
current account data, which will be released at 1300 GMT.
Analysts expect a 975 million euro deficit.
The Romanian leu <EURRON=> added 0.4 percent to trade near
nine-month highs on Friday after the Bucharest parliament, as
expected, approved a tight budget late on Thursday, key to
unlocking stalled international funding. []
However, after recent gains in the leu, the top performer in
the region this year, the market was now eyeing the release of
3.3 billion euros worth of an international aid package, frozen
last year because of political uncertainties.
"The approval of the budget has already been cashed in by
the market. Let's now look forward to the resumption of the IMF
deal," said one dealer in Bucharest.
A mission to review the country's stalled 20 billion euro
aid deal will start in Bucharest on Jan 20. []
"The resumption of IMF funding... will provide cover for
further cuts in domestic interest rates. We think rates will
fall by 150bps to 6 percent over the course of 2010," Capital
Economics said in a research note.
"(It is) good news in that (Romania) should get the IMF
programme back on track, we doubt that it will do much to boost
growth."
BONDS STABLE
Polish yields were stable as the rally seen on currency
markets was muted by some selling pressure on bonds.
"I think we may still see some pressure on 10-year bonds,"
said Henryk Sulek, debt dealer at Bank Millenium. "Investors are
selling the papers hoping to buy them again but cheaper at a
tender."
Hungarian bonds returned to levels seen after Thursday's
successful bond auction, where all maturities were heavily bid,
erasing subsequent losses.
"We are riding the zloty, mostly," a dealer in Budapest
said, adding that the short end was in much heavier demand as it
benefits from the high carry, while recent demand for the
longer-dated bonds seems to have dissipated.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.85 25.979 +0.5% +1.81%
Polish zloty <EURPLN=> 4.037 4.049 +0.3% +1.66%
Hungarian forint <EURHUF=> 266.76 266.72 -0.01% +1.35%
Croatian kuna <EURHRK=> 7.289 7.28 -0.12% +0.28%
Romanian leu <EURRON=> 4.111 4.128 +0.41% +3.07%
Serbian dinar <EURRSD=> 96.771 96.92 +0.15% -0.92%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +13 basis points to +87bps over bmk*
7-yr T-bond CZ7YT=RR -7 basis points to +110bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +116bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +286bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +533bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +492bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +426bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1114 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaux, writing by Marton Dunai;
Editing by Ruth Pitchford)
