* CEE currencies mixed after Thursday rally
* Forint leads losses, crown firms
* Inflation eases in the region, poses rate dilemma
(Adds fixed income)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, April 10 (Reuters) - Emerging Europe's
currencies were mixed on Friday, in illiquid trade ahead of a
long weekend which precedes a month of tough policy decisions,
as pointed by inflation data earlier in the day.
Hungary's forint bounced back on the weaker side of a key
technical level of 290 in quiet trade dominated by a major
client order, while the Polish zloty held stronger than its 4.40
per euro resistance, but still weaker than Thursday's close.
The Czech crown, the only currency in the region to firm
against the euro this year as its fundamentals are healthier,
edged up, while the Romanian leu resumed a month-lasting
rangebound trading, interrupted by a rally on Thursday.
"This was a quiet day before Easter holidays in (most of)
the region, but we cannot say there will be a resurrection for
currencies when trading starts again next week, because there
are too many problems everywhere," one dealer in Bucharest said.
Central and eastern Europe, hammered by a global cash
squeeze, has seen its economies shrinking or slowing down
sharply and its inflation easing because of tumbling domestic
demand, which has prompted central banks to slash rates.
But the side effect of such an aggressive easing in monetary
policy was a stubborn weakening pressure on its currencies,
which now threatens financial stability and indirectly pushed
Hungary and Romania to seek international support.
Inflation data in Hungary and Romania on Friday had little
immediate impact on the region's currencies, but opened room for
new rate cuts aimed at helping ailing economies, which may add
extra weakening pressure. []
Markets are not watching only the macroeconomic dilemma of
central banks, but also the response to crisis by fresh
governments in Czech Republic and Hungary and an ERM-2 entry
effort in Poland.
Czech non-partisan prime minister Jan Fischer will start
picking his ministers next week, while Hungary's Gordon Bajnai,
who takes over on Tuesday, is expected to announce his programme
to help the recession-stricken economy after Easter.
In Poland, it remains unclear whether the government will
try to put the zloty into the pre-euro ERM-2 mechanism this
year, as originally envisaged in its euro plan.
Two Polish members of parliament quit the main opposition
party, the eurosceptical Law and Justice (PiS), on Thursday,
which could boost government efforts to enact a constitutional
amendment allowing for eventual euro adoption. []
Late on Thursday Goldman Sachs wrote that the resignations
were bullish for the zloty but said it was still unclear how the
other small parties and independent MPs would vote.
By 1418 GMT, the forint <EURRON=> fell 0.6 percent, the
zloty <EURPLN=> weakened by 0.4 percent, while the crown
<EURCZK=> firmed 0.2 percent and the leu <EURRON=> was stable.
Bond markets were also quiet. Polish paper weakened along
the curve, especially at the long-end after the finance ministry
announced supply for the Wednesday switch tender.
"There's a possibility yields may go up further before the
auction," said Tomasz Bielanowicz, dealer at PKO BP in Warsaw.
The country's finance ministry will offer bonds due in 2014,
2019 and 2022 at a switch tender next Wednesday in exchange for
five-year DS0509 and two-year OK0709 papers maturing in 2009.
[].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.425 26.48 +0.21% +1.24%
Polish zloty <EURPLN=> 4.367 4.351 -0.37% -5.77%
Hungarian forint <EURHUF=> 290.08 288.26 -0.63% -9.15%
Croatian kuna <EURHRK=> 7.394 7.38 -0.19% -0.39%
Romanian leu <EURRON=> 4.125 4.126 +0.02% -2.68%
Serbian dinar <EURRSD=> 94.039 93.777 -0.28% -4.85%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +11 basis points to 182bps over bmk*
4-yr T-bond CZ4YT=RR -8 basis points to +221bps over bmk*
8-yr T-bond CZ8YT=RR +24 basis points to +303bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +400bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +346bps over bmk*
10-yr T-bond PL10YT=RR +8 basis points to +295bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -10 basis points to +878bps over bmk*
5-yr T-bond HU5YT=RR -10 basis points to +798bps over bmk*
10-yr T-bond HU10YT=RR -10 basis points to +672bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1718 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Marius Zaharia, Editing by Ron Askew)
