*Zloty seen leading gains, firming 4 pct vs EUR in 12 months
*Leu seen firming 2 pct, crown 1 pct, forint broadly flat
By Sandor Peto
BUDAPEST, Nov 3 (Reuters) - Central European currencies are
seen firming up in the next 12 months, helped by an economic
recovery in Europe and greater global risk appetite as the
Federal Reserve pumps cheap money into the U.S. economy.
Poland's zloty <EURPLN=> could lead the way with gains of
about 4 percent versus the euro to 3.80 in a year's time,
according to 37 analysts polled by Reuters from Oct 29 to Nov 2.
Romania's leu <EURRON=>, Central Europe's underperformer
this year, is seen firming by about 2 percent in the next 12
months to 4.19 to the euro, compared with 4.22 projected a month
ago.
The Czech crown <EURCZK=> -- the region's safe-haven unit
and a strong outperfomer in 2010 -- is expected to gain about 1
percent to 24.28, compared with a 25.28 forecast a month ago.
Hungary's forint <EURHUF=> could, however, remain flat after
a two-month rally as 2011 state budget details published over
the weekend resolved imminent deficit problems but left question
marks over long term fiscal sustainability.
Investors continue to eye budget and debt dynamics and
political fragilities in the region as European states struggle
to cut deficit levels.
But manufacturing indices rose in the euro zone in October
[][], improving the growth prospects
of the European Union's (EU) emerging economies.
If the Federal Reserve effectively weakens the dollar by
printing money, that helps Central Europe's currencies as it
fuels risk appetite while having little impact on the region's
exports, which mainly go to the euro zone.
GROWTH VERSUS BUDGETS
Hungary's forint has gained almost 6 percent against the
euro in the past two months, well outperforming the region.
Long zloty/forint <PLNHUF=R> positions were closed as
Hungary's government pledged to cut its 2011 budget deficit to
meet EU requirements, while Poland's central bank disappointed
some market participants last week by not hiking interest rates.
A month ago analysts projected forint levels around 276.50
against the euro on the 3-month horizon, but now expect mild
firming to 270 and project that the currency could stay at that
level in the next 12 months.
But the forint and the leu remain vulnerable to swings in
global sentiment as their fiscal positions remain more fragile
then elsewhere in the region, analysts said.
Hungary plans to cut income taxes to help economic growth,
but its special taxes on companies and measures to divert
private pension savings back into state coffers in the budget
have raised concerns over midterm fiscal policy. []
"While positive sentiment on global markets shelters the
currency from depreciation, the forint may significantly weaken
when global markets enter a correction," said Peter Poplawski of
BGZ Bank in Warsaw.
Poland's PMI manufacturing index rose to a 77-month high in
October [], underlining the fact that it has the
most robust growth prospects in the region. Privatization
revenues and expected monetary tightening are also seen helping
the zloty.
The analysts in the poll projected that the zloty could firm
about 2 percent to 3.88 against the euro by the end of January,
compared with 3.9 projected for the 3-month horizon a month ago.
"There is growing risk that the zloty comes under pressure
in 2011 as fiscal consolidation remains too weak," said Ralf
Wiegert of IHS Global Insight. "In general, though, we expect
Poland's robust recovery to provide enough support to limit
downside risks."
The crown is expected to firm slightly to 24.45 in the next
3 months, a stronger level than 24.55 projected a month ago.
"Given no interest rate disparity (advantage) against the
euro, potential for appreciation is likely to be limited," said
Poplawski. "The crown, however, (is the) least likely to suffer
in case of worsening moods on financial markets," he added.
For data please click on <CEEFXPOLL01>
(Reporting by Sandor Peto; Editing by Hugh Lawson)
