* Investors book gains from week-long rally
* Currencies hold gains from Swiss cbank franc selling
* Narrower C/A gaps show extent of slowdown
(Updates throughout)
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, March 13 (Reuters) - The Polish zloty edged
up on Friday, while Hungary's forint fell from morning highs but
still held on to strong gains from a rally in stocks and the
Swiss central bank's move to sell francs on Thursday.
The Swiss move had helped central European currencies whose
sharp weakening has threatened to push households -- notably in
Poland and Hungary -- into default on foreign currency loans,
many taken out in the Swiss currency.
Investors on Friday took profits from the recent gains but
strategists said saw some room for further strengthening.
"I think in the short-term there is still potential for a
further upward movement," Societe Generale emerging markets
strategist Murat Toprak said. "But fundamentally nothing has
changed. The main problems in the region have not been fixed."
Societe Generale recommended on Friday closing long euro
positions versus the region's currencies for the moment.
[]
The Polish zloty <EUPLN=> gained 0.2 percent on the euro
from Thursday's domestic close by 1452 GMT, bidding at 4.513.
The Czech crown <EURCZK=> firmed 0.4 percent to 26.605 to
the euro, and the forint <EURHUF=> dipped 0.5 percent but stayed
on the strong side of the key 300 per euro level.
Stock markets in Europe also extended gains with a further
pickup in risk appetite as big U.S. banks showed signs that the
sector was stabilising. []
Central Europe's currencies have taken a heavy beating in
recent months on concerns their economies are too reliant on
foreign financing and exports, and the drastic slowdown or slide
into recession caused by the global economic crisis.
Bulgaria's and Romania's current account deficits fell by
about half in January, showing an abrupt reduction in the Balkan
duo's main economic weak point. []
INTEREST RATES IN FOCUS
Polish central bank Governor Slawomir Skrzypek said the
zloty may continue appreciating, reflecting Poland's better
economic fundamentals. []
The zloty gained 4.8 percent this week, and the forint
clawed back from a record low of 317.45 per euro a week ago with
a 4.9 percent rise since then. The crown rose 3.8 percent in the
past week to wipe out 2009 losses.
Romania's leu was flat and dealers said it was likely to stay
in tight ranges until the country announces the results of talks
with an International Monetary Fund on an aid package.
Attention next week is also likely to start turning towards
upcoming central bank meetings. Rate setters have cut borrowing
costs in recent moves, but analysts said that only accelerated
currency falls and expect a pause to rate cycles for now.
In Poland, a central bank policy council member said on
Friday the bank should not lower rates in large moves because of
the zloty. []
On bond markets, Hungarian yields dropped after the debt
agency said late on Thursday it aimed to buy back large amounts
of bonds expiring 2010-2012, to help the market from which
foreign investors have cut exposure since October.[]
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.605 26.721 +0.44% +0.56%
Polish zloty <EURPLN=> 4.513 4.523 +0.22% -8.82%
Hungarian forint <EURHUF=> 298.35 296.8 -0.52% -11.66%
Croatian kuna <EURHRK=> 7.422 7.435 +0.18% -0.77%
Romanian leu <EURRON=> 4.277 4.271 -0.14% -6.14%
Serbian dinar <EURRSD=> 94.348 94.468 +0.13% -5.16%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +31 basis points to 231bps over bmk*
4-yr T-bond CZ4YT=RR -26 basis points to +248bps over bmk*
8-yr T-bond CZ8YT=RR -5 basis points to +306bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -35 basis points to +1082bps over bmk*
5-yr T-bond HU5YT=RR -40 basis points to +995bps over bmk*
10-yr T-bond HU10YT=RR -40 basis points to +829bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1555 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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Spot FX rates Eastern Europe spot FX <EEFX=>
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(Reporting by Reuters bureaus, Writing by Sandor Peto and Jason
Hovet; Editing by Jon Boyle)
