* Zloty, forint hit key technical levels, bounce back after
* Polish current account surplus helps zloty
* Markets eye Fed meeting
(Recasts with Polish C/A impact, quotes, detail)
By Sandor Peto and Marius Zaharia
BUDAPEST/BUCHAREST, Aug 12 (Reuters) - The Polish zloty and
the Hungarian forint erased morning losses on Wednesday, after
hitting technical support levels and helped by strong current
account data in Poland.
Dealers in the region said the forint bounced back at 275
per euro due to technical factors and the zloty changed
direction after it found no support beyond 4.21 per euro.
In Poland, current account data showed a surplus well above
expectations [], another example of how the region's
largest economy is outperforming peers.
"The surprise is big and it's positive," said ING Bank's
Grzegorz Ogonek. "We expected a surplus half this size and we
were still some of the biggest optimists on the market."
At 1358 GMT, the forint <EURHUF=> and the zloty <EURPLN=>
traded 0.3-0.4 percent stronger on the day, while the Czech
crown <EURCZK=> and the Romanian leu <EURRON=> were flat.
The zloty may have been helped also by a recommendation from
Erste Group to buy that currency against the euro or forint due
to better Polish economic fundamentals and the fact that it had
the most to make up in losses. []
The currencies were on a weaker footing earlier in the
session, continuing a Wednesday correction as investors booked
profits in the run up to the U.S. central bank's meeting, with
eyes mostly on its economy statements afterward.
In Hungary, the forint and government bonds were not moved
by the minutes of the latest meeting of the central bank where
it cut rates by a bigger than expected 100 basis points in a
tight vote.[]
WAITING ON THE FED
Analysts note central Europe's recent rise was fragile, and
EBRD said on Wednesday the region's economic crisis remains a
threat and warned against premature optimism [].
Many say regional trends are dependent on global mood.
"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," Erste said in its trade
idea.
Goldman Sachs recommended to close short protection
positions in 5-year Hungarian credit default swaps as the
spreads had fallen sharply in the past weeks, and risk sentiment
may be the most important driver of moves.[]
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.
The retreat of the region's currencies from the past few
months' strong gains also pulled government bond prices lower,
especially in the first part of the Wednesday session.
But Polish bonds traded a touch up on the day after the
zloty rebounded. Early selling 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>.
Poland sold 3.5 billion zlotys worth of five-year bonds at a
tender on Wednesday.[].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.793 25.788 -0.02% +3.72%
Polish zloty <EURPLN=> 4.167 4.185 +0.43% -1.25%
Hungarian forint <EURHUF=> 272.17 273 +0.3% -3.17%
Croatian kuna <EURHRK=> 7.32 7.322 +0.03% +0.61%
Romanian leu <EURRON=> 4.218 4.217 -0.02% -4.83%
Serbian dinar <EURRSD=> 93.41 93.556 +0.16% -4.21%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 56bps over bmk*
4-yr T-bond CZ4YT=RR +38 basis points to +149bps over bmk*
8-yr T-bond CZ8YT=RR +9 basis points to +249bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +345bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +293bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +265bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +18 basis points to +676bps over bmk*
5-yr T-bond HU5YT=RR +14 basis points to +609bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +522bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1658 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marton Dunai/Sandor Peto/Marius Zaharia;
Editing by Andy Bruce)
