* Looming rate cuts weigh on the region
* Currencies remain rangebound
By Marius Zaharia
BUCHAREST, June 18 (Reuters) - The Polish zloty and the
Hungarian forint weakened slightly on Thursday, but the moves
remained within recent ranges as regional investors were split
between growing rate cuts expectations and global trends.
"People are pricing in rate cuts and (regional) currencies
do not look overly attractive at the moment," one dealer said.
By 1017 GMT, the Czech crown <EURCZK=> and the Romanian leu
<EURRON=> were stable, while the Hungarian forint <EURHUF=> lost
0.6 percent and the Polish zloty <EURPLN=> dropped 0.4 percent.
"The correction (weakening) in the region's currency markets
continues," one Budapest-based dealer said. "We have seen the
same movement several times (in the past weeks) when the forint
has been trading between 275/278 and 288/293 against the euro."
Dealers said currencies were also closely tracking
euro/dollar moves.
This week's releases of indicators have bolstered
expectations for more monetary easing starting next week in
Poland, Romania and even Czech Republic, where rates stand as
low as 1.5 percent.
Hungary may be the only large economy in eastern Europe
where the central bank may hold fire at its next meeting,
fearing a cut could undermine the forint, a Reuters poll showed
on Thursday [].
Currencies were mostly rangebound this week, as investors'
worries over the region's vulnerability were balanced by a
relief from the Latvian parliament, which passed sharp budget
cuts on Tuesday, opening way for more foreign aid.
Improving current account data from the region failed to
give markets momentum [], because it also underlined
recession was deepening in the region.
Regional currencies have been mostly rangebound since the
end of April, when risk appetite started to pick up, showing
that lingering uncertainty will delay any recovery in the
region.
Analysts said concerns about the health of central European
banks and financing hurdles, while most of the regional
economies are sinking, still pointed towards a more fragile
outlook compared with other emerging regions.
In Hungary, three bond auctions were oversubscribed as
expected on Thursday and the government sold more than it
planned []. Hungarian and Polish yields remained
relatively unchanged from Wednesday.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.642 26.654 +0.05% +0.42%
Polish zloty <EURPLN=> 4.536 4.52 -0.35% -9.28%
Hungarian forint <EURHUF=> 283.7 282 -0.6% -7.1%
Croatian kuna <EURHRK=> 7.285 7.276 -0.12% +1.1%
Romanian leu <EURRON=> 4.231 4.226 -0.12% -5.12%
Serbian dinar <EURRSD=> 92.737 92.977 +0.26% -3.51%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 135bps over bmk*
4-yr T-bond CZ4YT=RR +8 basis points to +160bps over bmk*
8-yr T-bond CZ8YT=RR +13 basis points to +286bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +384bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +323bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +289bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +815bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +784bps over bmk*
10-yr T-bond HU10YT=RR +8 basis points to +695bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1317 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia,
Editing by ...)
