* Zloty falls more on euro hope reversal
* Flu uncertainty hits region
(Updates throughout, adds Polish bond data)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, April 27 (Reuters) - Poland's fading euro
hopes and signs of a deeper economic slowdown weakened the zloty
by around 2 percent on Monday, while worries over North
America's swine flu outbreak rattled investors who cut risk.
Data last week showing Poland's budget deficit exceeded the
EU's 3 percent ceiling and would likely do so again this year
has cast doubt over the government's plans to join the euro zone
in 2012 and has pummelled the zloty.
On Monday, weaker than expected retail sales data and rising
unemployment [] showed the slowdown of the Polish
economy may be deeper, complicating any attempt to tighten the
budget to meet euro adoption conditions.
"The zloty has been falling significantly today ... because
of this story with the budget deficit, as everybody had expected
it to be at least below 3 percent and that has some implications
for the euro road map," said Nordea Bank's Anders Svendsen.
"They now have to implement stricter fiscal policy and that
is very negative in the current scenario, when it's not exactly
what the economy needs."
A finance ministry official said, however, a document on
Monday updating Poland's plans to switch to the euro kept open
the possibility of meeting the original goal [].
Poland's zloty <EURPLN=> led currency losses, falling 1.9
percent to an almost 1-month low as investors unwound trades
where they had bet long on the zloty against its peers. The unit
has shed 8.5 percent since hitting a 3-month high on Apr. 15.
The Czech crown <EURCZK=> shed 0.4 percent to 26.709 per
euro by 1353 GMT, while the Hungarian forint <EURHUF=> edged down to 295.6 per euro. Romania's leu <EURRON=> rose 0.5 percent.
Hungarian and Czech bonds eased in light trade.
A NEW BLOW
Although cross trading against the zloty supports other
regional currencies, most of them remained rangebound, on
worries over the impact of a swine flu virus that has killed
more than 100 people in Mexico and has spread to other countries
[].
The World Bank estimated last year that a flu pandemic could
cost the global economy $3 trillion. [].
"The turn of events in Mexico again highlights the
particular vulnerability this year of the global economy to any
"natural" disasters," Cheuvreux emerging markets economist Simon
Quijano-Evans wrote in a note.
Analysts expect nearly all of the region's economies to
slide into recession this year due to falling demand for their
goods from western markets.
Global finance leaders meeting in Washington over the
weekend said a "break in the clouds" of the global economic
storm was appearing. []
Currencies, led by the zloty, have fallen by up to a quarter
since record highs last summer as worries over banking stability
and weak manufacturing reversed investment flows, putting a
strain on policymakers.
Strategists expect pressure to remain despite 5-10 percent
gains since February lows as economic woes hit jobs and banks.
The Polish and Hungarian central banks said on Monday they
would continue foreign exchange swap agreements with the
European Central Bank and the Swiss National Bank until the end
of July. [] []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.709 26.615 -0.35% +0.16%
Polish zloty <EURPLN=> 4.568 4.481 -1.9% -9.92%
Hungarian forint <EURHUF=> 295.61 295.42 -0.06% -10.85%
Croatian kuna <EURHRK=> 7.427 7.42 -0.09% -0.83%
Romanian leu <EURRON=> 4.21 4.23 +0.48% -4.65%
Serbian dinar <EURRSD=> 95.213 94.25 -1.01% -6.02%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -17 basis points to 157bps over bmk*
4-yr T-bond CZ4YT=RR +11 basis points to +201bps over bmk*
8-yr T-bond CZ8YT=RR +15 basis points to +296bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +7 basis points to +416bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +350bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +306bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +31 basis points to +899bps over bmk*
5-yr T-bond HU5YT=RR +25 basis points to +849bps over bmk*
10-yr T-bond HU10YT=RR +24 basis points to +760bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1653 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/Marius
Zaharia; Editing by Ruth Pitchford)
