* FX, stocks down as investors cut risk
* Zloty gives up IMF gains, crown hits 2-1/2 week low
* Hungarian cbank holds rates, forint slips
(Updates prices)
By Jason Hovet
PRAGUE, April 20 (Reuters) - The Polish zloty hit a one-week
low on Monday and wiped out its gains from news of an IMF credit
line last week as waning optimism over the global economy
prompted investors to cut back on riskier holdings.
Other emerging European currencies slipped along with stock
markets, with no surprises from Hungary's central bank which
kept interest rates flat at 9.5 percent for a third straight
month due to the volatile forint. []
The zloty <EURPLN=> lost more than 2 percent to 4.389 to the
euro by 1415 GMT, returning to levels seen before last Tuesday's
government announcement that it would seek $20.5 billion under
the International Monetary Fund's new flexible credit line.
"Sentiment has shifted, and investors are more realistic on
the global economy," said Danske Bank emerging market analyst
Stanislava Pravdova. "We may be seeing some (economic)
stabilisation, but that will take some time to show."
Polish industrial output fell by a much less than expected 2
percent annually in March, data showed on Monday, compared with
drops of around a fifth for some peers. []
But Germany's central bank said on Monday the euro zone
giant's recession intensified in the first quarter, darkening
prospects for central Europe's export-led economies. Global
policymakers also moved to temper optimism. []
Investors booked profits after the zloty had jumped more
than 4 percent to a 3-month high last week, but strategists said
the IMF option would help buoy the zloty and open up more
options to profit from cross-trades in the region.
Societe Generale on Friday recommended the zloty against the
forint or leu due to Poland's move to get the IMF credit line
and after its underperformance versus peers. []
PULLBACK
The zloty has led gains in central Europe with a 12.3
percent rise since mid-February, when it neared an all-time low,
but has lost 23.5 percent since July to lead regional losses.
The Czech crown <EURCZK=> fell to a 2-1/2 week low at 27.036
per euro, while Romania's leu <EURRON=> was 0.7 percent down,
although local markets were shut for the orthodox Easter
holiday.
In Hungary, one of the hardest hit in the downturn, the
forint <EURHUF=> fell almost 1 percent from Friday's domestic
close to 299.35 per euro, while bond yields widened about 20
basis points. The new government is set to cut spending deeply
under a strict new budget to help the country out of recession.
[] []
"Broader sentiment will continue to govern the forint's
course, local fiscal policy will have any impact on the exchange
rate only in the medium term," a local trader said.
Strategists expect currencies to weaken more against the
euro due to a grim economic outlook and lagging effects on the
financial system, but Poland is seen better placed than others.
"Fundamentally the situation remains quite difficult,"
SocGen emerging strategist Murat Toprak said on Monday.
"What we fear is a deterioration of the financial system in
central and eastern Europe because of an increase in
non-performing loans. That is our key concern going forward."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.036 26.788 -0.92% -1.05%
Polish zloty <EURPLN=> 4.389 4.295 -2.14% -6.24%
Hungarian forint <EURHUF=> 299.35 296.5 -0.95% -11.96%
Croatian kuna <EURHRK=> 7.396 7.381 -0.2% -0.42%
Romanian leu <EURRON=> 4.244 4.215 -0.68% -5.41%
Serbian dinar <EURRSD=> 92.89 92.84 -0.05% -3.67%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -15 basis points to 194bps over bmk*
4-yr T-bond CZ4YT=RR +13 basis points to +202bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +292bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +413bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +349bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +297bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -17 basis points to +918bps over bmk*
5-yr T-bond HU5YT=RR -50 basis points to +888bps over bmk*
10-yr T-bond HU10YT=RR -39 basis points to +777bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1515 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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(Reporting by Reuters bureaus, writing by Jason Hovet;
Editing by Toby Chopra/Victoria Main/Ruth Pitchford)
