* Czech markets gear up for weekend election
* Polish rate meeting starts, decision due Tuesday
* Floods in Poland not harming zloty
(Updates throughout)
PRAGUE/WARSAW, May 24 (Reuters) - Central European
currencies were mixed on Monday in quiet trade, with Poland's
zloty a touch lower and the Czech crown rising slightly, but
markets are likely to remain volatile this week amid persistent
worries over the euro zone's fiscal woes.
The euro came under more pressure on Monday after the
takeover of a Spanish savings bank by Spain's central bank
unnerved investors and dampened sentiment towards central
European currencies.
However, the region's currencies held on to gains earned
last week, when Germany's approval of its share of a $1 trillion
safety net for debt-laden euro zone states lifted risk appetite.
"Taking into account what happened in the past days, we can
say that today's trade was boring," said one Warsaw-based
dealer. "It looks like the region is fed up with news coming
from the euro zone and I expect the market should calm down
further."
In Poland the central bank's Monetary Policy Council (MPC)
started a two-day meeting. A decision on rates is due on
Tuesday, but with most analysts expecting no change in rates
dealers said it should not affect the market.
In the Czech Republic, markets were looking to elections
this weekend but with the winner far from certain, it could
result in weeks or months of protracted coalition talks.
The overwhelming majority of analysts polled by Reuters last
week said a weak government, with no strong majority to kick off
reforms and cut the budget, was one of the main risks from the
Czech vote. [] []
Czech politics are fragmented in contrast to neighbours like
Hungary, where the centre-right Fidesz won polls in April with a
two-thirds majority, or Poland, where the ruling party's
candidate will likely win a June presidential election.
By 1331 GMT, the crown <EURCZK=> added 0.1 percent to 25.607
to the euro and the Polish zloty <EURPLN=> was unchanged.
Hungary's forint <EURHUF=> was also flat against the euro,
while Romania's leu <EURRON=> rose 0.1 percent.
Stocks in the region were in the black, with Prague's PX
<> leading gains, rising some 2 percent. Stock markets in
Hungary and Romania were closed for a public holiday.
UNCERTAIN OUTLOOK
Central Europe's economic fortunes are closely tied to the
euro zone, where investors fear tough fiscal measures mainly in
southern states will dent the bloc's fragile economic recovery.
Analysts in Poland, the only EU member to avoid recession
last year, said the zloty could attack the 4.0 per euro level if
market sentiment stabilised. Heavy flooding in the country was
not likely to impact the currency despite the cost to the state,
they added. []
"We don't expect the crisis to have a negative effect on the
zloty as long as the government doesn't increase the deficit. We
see the chances of such a move as less than 50 percent," Bank
Handlowy wrote in a morning note.
Polish bonds were relatively stable after opening 4-6 basis
points lower on Monday.
The zloty has swung from a high of 3.8225 per euro in April
to a low of 4.24 earlier this month. The head of state-owned BGK
said last week the bank is increasingly active on the foreign
exchange and money markets, commenting after market sources told
Reuters the bank sold euros to bolster the falling zloty.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25,607 25,643 +0,14% +2,78%
Polish zloty <EURPLN=> 4,098 4,098 0% +0,15%
Hungarian forint <EURHUF=> 278,08 278,07 0% -2,78%
Croatian kuna <EURHRK=> 7,268 7,27 +0,03% +0,57%
Romanian leu <EURRON=> 4,176 4,182 +0,14% +1,47%
Serbian dinar <EURRSD=> 102,41 101,82 -0,58% -6,38%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to 122bps over bmk*
7-yr T-bond CZ7YT=RR +9 basis points to +139bps over bmk*
10-yr T-bond CZ9YT=RR +13 basis points to +134bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +12 basis points to +405bps over bmk*
5-yr T-bond PL5YT=RR +10 basis points to +377bps over bmk*
10-yr T-bond PL10YT=RR +10 basis points to +315bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Dagmara Leszkowicz, editing by Jason Webb/Toby Chopra/Susan
Fenton)
