* FX recover, forint holds gains after rate cut
* Leu holds tight after first round of elections
(Updates with Hungary cbank comments, price)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Nov 23 (Reuters) - Central European
currencies rebounded on Monday, while the Hungarian forint held
gains and government bonds rose after the central bank, as
expected, cut interest rates a half percentage point.
Stock markets also gained as markets recovered from jitters
on Friday over Ukraine's debt, which knocked central European
assets and banks exposed there, and highlighted the fragility of
a half-year rally for emerging assets. []
In Romania, the leu was steady after the first round of a
presidential election on Sunday that saw incumbent Traian
Basescu take a slim lead, stuck within the range it has held
since a government collapse last month. []
A second and final round of voting is scheduled for Dec. 6,
and the winner nominate the next prime minister, tasked with
getting Romania's IMF aid package back on track.
The leu <EURRON=> held on the strong side of the 4.3 per
euro level that dealers have speculated the central bank has
aimed to protect with interventions.
The leu has lagged a currency rally this month, gaining 0.7
percent since Nov 1, while peers are up around 3 percent.
The forint <EURHUF=> bid up 0.3 percent at 267.6 to the euro
by 1602 GMT, and bond yields rose further to gain about 10 basis
points on the day after the central bank cut rates to an almost
3-1/2 year low of 6.5 percent. []
Hungary has cut 300 basis points in five months and most
analysts expect the key rate to bottom at 5.5 percent next year.
RATE DIFFERENTIAL
Markets, though, have started to question the easing speed.
Central bank chief Andras Simor said further cuts would depend
on risk assessment and the inflation outlook. []
"With many in the market now looking for a risk selloff into
year end and HUF possibly coming under some pressure, a pause
cannot be ruled out but we think on balance they will be able to
keep cutting to 5.50 percent in January," said Peter Attard
Montalto, emerging economist with Nomura.
The central bank also said it widened the interest rate
corridor determined by the overnight credit and deposit
facilities to plus/minus 100 basis points to boost liquidity.
The measure cuts the yields of foreign investors who keep
their money in Hungarian overnight facilities, although dealers
were sceptical of its overall impact. []
Elsewhere, the Czech crown <EURCZK=> was up 0.1 percent at
25.85 and Poland's zloty <EURPLN=> rose 0.6 percent.
In Poland, the central bank meets on policy on Wednesday,
with analysts expecting rates unchanged until mid-2010. Markets
are also more certain the Czechs' monetary easing has ended.
Polish and Czech bonds firmed on Monday with the recovery.
"The (Czech) bond market... still lacks strong stimuli these
days and yield curve volatility continues to be minimal as even
the short end does not follow bigger koruna's changes," CSOB
analysts said.
"It seems that the market has become quite sure that the CNB
will not change official rates for foreseeable future."
The Czech and Polish interest rates are at an all-time low
at 1.25 percent and 3.5 percent respectively.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.854 25.878 +0.09% +3.48%
Polish zloty <EURPLN=> 4.118 4.143 +0.61% -0.07%
Hungarian forint <EURHUF=> 267.61 268.35 +0.28% -1.52%
Croatian kuna <EURHRK=> 7.31 7.312 +0.03% +0.75%
Romanian leu <EURRON=> 4.27 4.279 +0.21% -5.99%
Serbian dinar <EURRSD=> 94.24 94.34 +0.11% -5.05%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +5 basis points to 113bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +111bps over bmk*
10-yr T-bond CZ10YT=RR -8 basis points to +94bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -12 basis points to +521bps over bmk*
5-yr T-bond HU5YT=RR -11 basis points to +466bps over bmk*
10-yr T-bond HU10YT=RR -12 basis points to +411bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1704 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Jason Hovet; Editing by Patrick Graham and Matthew
Jones)
((dagmara.leszkowicz@thomsonreuters.com, RM:
dagmara.leszkowicz.reuters.com@reuters.net, tel +48 22 653 9718))
