* Zloty firms, forint weakens, other markets rangebound
* Poll shows CEE currencies may gain in long term
* Investors watching Bulgaria election over weekend
(Updates throughout)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, July 3 (Reuters) - The Polish zloty
strengthened on Friday, extending this week's rally, while the
forint weakened, as investors looked to build positions in
markets seen outperforming in the long run.
Regional currencies hit multi-month highs this week during a
rally driven by strong current account figures in Hungary,
encouraging Purchasing Managers' Indices throughout the region
and an overall better global sentiment.
But on Friday, only the zloty -- seen leading regional gains
over a 12-month horizon -- extended gains.
"Looks like there are regional allocations and now the PLN
is the favourite, it may be profit taking on earlier PLN/HUF
shorts, making the HUF a bit of an underperformer in the
region," a Budapest-based currency dealer said.
"Next week global sentiment will continue to govern CEE
currencies. In a relaxed environment the HUF can make an
approach at 265 but in the opposite case it can move in a
270/280 range," the trader said.
By 1322 GMT the zloty <EURPLN=> had gained 0.4 percent from
the previous domestic close, just about what the forint
<EURHUF=> had lost. The Czech crown <EURCZK=> and the Romanian
leu <EURRON=> were steady.
A Reuters poll on Thursday showed central European
currencies were expected to retreat by the end of the third
quarter, but then rise over the next 12 months. []
The forint, though, was expected to buck this trend and may
post no further gains. This week, however, both currencies
gained more than 2 percent.
Data on Thursday showed U.S. employers cut more jobs than
expected last month, while euro zone unemployment rose in May to
a 10-year high. []. This dampened prospects for
central Europe's export-heavy economies and led to a correction
in currency gains.
ROOM FOR GAINS NEXT WEEK
Next week, markets will have to digest a raft of inflation,
industry and trade data and dealers said some of those
indicators were expected to show improvement and boost appetite
for regional assets.
Jan Vejmelek, head of economic and strategy research at
Komercni Banka, expected Czech Republic to post a higher trade
surplus on Tuesday. "This could create some room for short-term
(crown) appreciation," he said.
Goldman Sachs analysts said the outlook for all Hungary's
assets was set to improve further.
"The normalization in risk sentiment and overall market
premiums will be reducing pressures on Hungarian assets," they
wrote in a note on Thursday.
Investors were also keeping an eye for the Bulgarian
parliament election over the weekend, where results may offer
clues about the Balkan state's chances to support its currency
board and tap IMF funds. []
On debt markets, traded was quiet on Friday. Polish bonds
extended gains a notch on the back of a well-bid 2-year bond
sale earlier this week and increased expectations for rate cuts.
Poland's government pushed for further monetary easing on
Friday, while one central banker said inflation was too high for
more cuts. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.855 25.875 +0.08% +3.47%
Polish zloty <EURPLN=> 4.353 4.37 +0.39% -5.47%
Hungarian forint <EURHUF=> 272.8 271.6 -0.44% -3.39%
Croatian kuna <EURHRK=> 7.328 7.295 -0.45% +0.5%
Romanian leu <EURRON=> 4.2 4.205 +0.12% -4.42%
Serbian dinar <EURRSD=> 93.277 93.273 0% -4.07%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -34 basis points to 138bps over bmk*
4-yr T-bond CZ4YT=RR -20 basis points to +169bps over bmk*
8-yr T-bond CZ8YT=RR +11 basis points to +313bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +394bps over bmk*
5-yr T-bond PL5YT=RR -9 basis points to +326bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +789bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +706bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +602bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1622 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 []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Dagmara
Leszkowicz/Marius Zaharia; editing by Chris Pizzey)
