(Adds fresh prices, comments, bond yields.)
BUDAPEST, Aug 12 (Reuters) - Central European currencies and
government bonds fell on Wednesday, led by the forint and the
zloty as risk aversion continued to weigh on emerging assets,
and the region's former top gainers felt the pain the most.
"Currencies which previously outperformed weakened the
most on average," UniCredit said in a note to clients, adding
that the zloty was especially at risk of weakening.
After falls in early morning trade against the euro, the
units regained some ground by 0928 GMT.
The forint <EURHUF=> was 0.4 percent weaker and the zloty
<EURPLN=> 0.3 percent down, the Romanian leu<EUURON=> shed 0.1
percent, while the Czech crown <EURCZK=> was largely flat with
weakening bias.
But dealers said currency appreciation would remain the
regional trend in the period when the world economy starts to
leave behind the worst of the crisis.
Erste Group recommended buying the zloty against the euro,
saying in a note that Poland, one of the economies converging
with the richer euro zone, has been coping with the crisis
better than its regional peers. []
"Risk factors for our trading idea are primarily of a global
nature. Should the recovery be too slow and painful, possibly
connected with yet another strike of the crisis... and
consequent worsening of the market sentiment, we might yet see
another wave of weakening of the zloty," it said.
Hungary's central bank will publish minutes of its July 27
rate meeting later in the day, and markets view this as a key
indicator on future rate trajectory, both for vote disposition
and comments. The bank cut rates by a surprise 100 basis points
to 8.5 percent last month in a tight vote.
In Poland, the market is watching the current account data,
due out at 1200 GMT. Romania's current account deficit fell by
over 70 percent year-on-year in the first half of 2009 to 2.38
billion euros. []
Throughout the region, core markets continue to be key, with
waning risk appetite and profit taking after the recent rally
dictating the current weakening, dealers said.
Technical levels exist, such as the forint's 275 level
against the euro, but they matter less than usual these days, a
dealer in Budapest said.
Key will be statements by the Fed after the monetary policy
session today.
David Sykora, an FX dealer at Ceskoslovenska Obchodni Banka,
said the region should strengthen if the Fed indicates the U.S.
economy has rebounded and will soon start showing signs of a
recovery, as investors should take that as a signal they can
enter riskier assets including emerging markets currencies.
GOVERNMENT BONDS EASE
The retreat of the region's currencies from the past few
months' strong gains also pulled government bond prices lower.
Yields in Polish bonds inched up as the zloty continued to
cede recent gains due to rising risk aversion. Traders also said
bond prices might have dipped as investors await a slew of
additional supply of Polish papers.
At 1000 GMT at a primary tender the finance ministry plans
to offer 2.0-3.5 billion zlotys worth of 5-year papers.
A selling wave at the opening also pushed Hungarian bond
yields up, but the pressure subsided later, and traders said the
government could easily sell bonds at its auctions on
Thursday<HUISSUE>.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.816 25.81 -0.02% +3.63%
Polish zloty <EURPLN=> 4.2 4.187 -0.31% -2.02%
Hungarian forint <EURHUF=> 274.17 273.11 -0.39% -3.87%
Croatian kuna <EURHRK=> 7.322 7.322 0% +0.59%
Romanian leu <EURRON=> 4.222 4.219 -0.07% -4.92%
Serbian dinar <EURRSD=> 93.586 93.56 -0.03% -4.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 58bps over bmk*
4-yr T-bond CZ4YT=RR -4 basis points to +108bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +251bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +348bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +296bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +268bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -22 basis points to +677bps over bmk*
5-yr T-bond HU5YT=RR -55 basis points to +610bps over bmk*
10-yr T-bond HU10YT=RR -45 basis points to +524bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1128 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marton Dunai/Sandor Peto; Editing by Stephen
Nisbet)
