BUDAPEST, Aug 4 (Reuters) - East Europe's currencies were mixed on Tuesday with the Polish zloty gaining a little versus the forint, which eased slightly, dealers said.
The Romanian central bank holds a rate setting meeting later in the day at which it is expected to cut its key interest rate by 50 basis points to 8.5 percent.[
]Hungary cut its key interest rates by 100 basis points to 8.5 percent last week and players are now buying zlotys and selling forints as the interest rate spread has narrowed, while the Polish economy is in a better shape than Hungary's.
"The favourite trade is PLNHUF long again ... volumes are thin, and sentiment continues to be strong," a Budapest-based currency dealer said.
"Technically, if the PLNHUF goes above 65.20 then the forint will move to a range between 268-269 versus the euro."
The forint was trading around 266 to the euro at 0720 GMT.
Unicredit recommended long PLN/HUF trade in a note to clients on Monday.
"Recent sentiment indicators ...suggest that countries with more stable fundamental backdrop, together with looser monetary and fiscal conditions (including Poland) are recovering faster than countries with bigger financial stability worries (including Hungary)," Unicredit analyst Gyula Toth said.
After gaining about 1.5 percent against the euro on Monday, analysts said the Polish zloty could continue appreciating as global sentiment remains positive towards riskier assets.
"The engine of zloty gains is optimism on the global financial markets and high risk appetite," BPH Bank analysts wrote in a morning note to clients.
"If this positive sentiment persists and Asian bourses sessions seem to suggest this, then one may expect zloty to continue gaining," they said.
Hungary's forint <EURHUF=> was down 0.34 percent, while Poland's zloty <EURPLN=> was up 0.22 percent against the euro at 0700 GMT. The Czech crown <EURCZK=> and the Romanian leu <EURRON=> were basically flat.
On Monday, the zloty was also supported by better than expected Purchasing Managers Index (PMI) which showed a record gain and by the finance ministry's forecast which showed inflation could remain at 3.5 percent in July -- well above the central bank's target.
Analysts said this could mean the main interest rate, currently at an all-time low of 3.5 percent, could stay on hold until the incumbent Monetary Policy Council (MPC) gives way to their successors early in 2010.
The Czech crown <EURCZK=> was steady after underperforming peers to start the week, and dealers said there was limited room for firming before a central bank meeting later this week.
A thin majority of analysts, 11 out of 20, expected the Czech central bank to leave rates unchanged on Thursday in a Reuters poll last week while 9 analysts forecast a cut [
]."The region is still strong but the crown looks like a hedge against the short euro/zloty and forint," one dealer said. "Ahead of the central bank meeting, it's probably tough to see some strengthening." ----------------------MARKET SNAPSHOT------------------------- Currency Latest Previous Local Local
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today in 2009 Czech crown <EURCZK=> 25.678 25.66 -0.07% +4.19% Polish zloty <EURPLN=> 4.092 4.101 +0.22% +0.56% Hungarian forint <EURHUF=> 265.5 264.6 -0.34% -0.73% Croatian kuna <EURHRK=> 7.336 7.336 0% +0.4% Romanian leu <EURRON=> 4.196 4.199 +0.07% -4.33% Serbian dinar <EURRSD=> 92.917 93.047 +0.14% -3.7% All data taken from Reuters at 0859 CET. Currency percent change calculated from the daily domestic close at 1645 CET. For related news and prices, click on the codes in brackets: All emerging market news [
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