* Czech c.bank surprises, holds rates
* Crown recovers after c.bank explains decision
* Polish c.bankers see little scope for further cuts
* Polish retail sales stronger than fcast, Hungary's fall
(Updates with new FX moves, adds detail, quote)
By Sandor Peto and Marius Zaharia
BUDAPEST/BUCHAREST, June 25 (Reuters) - The Czech crown
<EURCZK=> recovered earlier losses late on Thursday, after the
central bank said risks of a deeper recession were easing, hours
after it surprisingly decided to hold rates.
The Czech crown, a traditional safe haven trade within the
region due to relatively strong fundamentals despite low yields,
briefly slipped to a low of 26.137 against the euro after the
interest rate decision from around 26.060 beforehand.
It has gradually recovered those losses to trade back around
its morning levels.
But after central bank's bullish comments and a vote
breakdown ended speculation that the absence of two board
members -- who in the past voted for cuts -- prevented the bank
from cutting rates, the crown firmed past 26.00. []
Central European currencies in general were under pressure
as stock markets fell. However, the forint <EURHUF=> and the
stock market of Hungary, where rates were kept on hold on
Monday, extended this week gains.
Hungary has been one of the most volatile regional markets
this year, but recently carry trades have helped the
high-yielding forint and central bank governor Andras Simor said
markets had "ample liquidity" and functioned orderly.
[]
Despite growing appetite for Hungarian assets, the IMF said
monetary policy must remain cautious [].
Poland's zloty <EURPLN=> was supported by comments from
several central bankers who signalled the easing cycle may have
neared an end after Wednesday's 25 basis points cut.
[] []
CARRY TRADE
Hungary's forint gained on its yield advantage, with
interest rates now at the highest level in the European Union at
9.5 percent.
"The carry trade which favoured the forint in the past days
can continue, but it can turn around quickly later if we have
bad domestic news," one Budapest-based dealer said.
Wednesday's huge liquidity infusion into euro zone markets,
through a money market operation by the European Central Bank,
also made the forint more attractive relative to the euro as
short-term euro zone money market rates slid.
A sharp drop in Hungarian retail sales, which slid a
calendar-adjusted 4.1 percent in April after a 3.6 percent drop
in March had little impact on the forint. []
Polish retail sales for May came in slightly above forecast,
growing 1.1 percent from a year earlier, while the number of
jobless inched down. []
Hungarian bond prices rose modestly, supported by gains in
the spot forint market, sending yields about 10 basis points
lower across the curve. Some traders said the state now had room
to increase bond supply which has been low since last year.
Hungary's finance minister has mandated several banks to
arrange meetings with investors for a possible international
bond offer. []
In addition to the Czech central bank, Serbia's central bank
held its key policy rate steady on Thursday because of worries
about inflation and the country's budget deficit. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26 26 0% +2.9%
Polish zloty <EURPLN=> 4.503 4.514 +0.24% -8.62%
Hungarian forint <EURHUF=> 276.65 277.49 +0.3% -4.74%
Croatian kuna <EURHRK=> 7.312 7.305 -0.1% +0.72%
Romanian leu <EURRON=> 4.216 4.222 +0.14% -4.78%
Serbian dinar <EURRSD=> 94.015 93.93 -0.09% -4.82%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -20 basis points to 121bps over bmk*
4-yr T-bond CZ4YT=RR -1 basis points to +179bps over bmk*
8-yr T-bond CZ8YT=RR +14 basis points to +299bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +391bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +337bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +301bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +16 basis points to +835bps over bmk*
5-yr T-bond HU5YT=RR +16 basis points to +764bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +677bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1724 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Writing by Gergely Szakacs/
Sandor Peto/Marius Zaharia; Editing by Toby Chopra)
