(adds detail, Hungarian bond data)
By Marius Zaharia
BUCHAREST, Feb 19 (Reuters) - The Polish zloty led regional
gains on Thursday, extending a two-day rebound from record lows
as expectations for more sales of Polish EU funds hit home and
officials in eastern Europe continued to talk up currencies.
Regional currency markets were hit this week by
deteriorating growth outlooks and worries about high foreign
debt reliance in some countries.
But the threat from the currencies' weakness to economic
stability has prompted policy makers to launch a defence on
Wednesday [] by verbal interventions and sales in
the currency market by the Polish finance ministry.
The World Bank also stepped in [], calling for
more EU help to the region.
Dealers said the zloty was likely to continue to improve as
investors expect the finance ministry to renew Wednesday's sales
of euros on the currency market bolstered by comments from
Finance Minister Jacek Rostowski. []
Asked whether the ministry would sell more euros on the
market, Rostowski told reporters: "At some point yes."
At 1107 GMT, the zloty <EURPLN=> had gained 1.7 percent at
4.701 per euro. Dealers in Hungary and Romania said the zloty's
strengthening helped the forint <EURHUF=> and the leu <EURRON=>
gain 0.7 and 0.2 percent, respectively.
Local players also pointed to gains on the stock market as
evidence of recovering interest in local assets. Warsaw's blue
chip index <> was up almost 5 percent on the day.
TALKING UP
The Czech central bank's vice-governor Miroslav Singer also
said he could not rule out more verbal intervention after he
said on Wednesday weakness of the currency could lead to higher
interest rates while cuts were out of question. []
He also said the latest economic decline should not cause
local banks serious problems, after two rating agencies said
earlier this week emerging European banks and their Western
owners could suffer in the global recession.
The Czech crown <EURCZK=> was 0.4 percent firmer, after a
brief boost from Singer's comments.
The zloty, the region's hardest hit currency this year,
bounced on Wednesday after a ruling party official said Poland
had started talks on joining the pre-euro ERM-2 mechanism, while
the government converted euros from EU funds on the market.
Hungary was also looking for "unconventional means" to prop
up the forint, its prime minister said on Wednesday.
"Yesterday's move of the government could be easily called a
masterpiece. I think it was a really insignificant amount of
money, but this move affected the market psychologically," said
one Warsaw-based dealer.
Economies entering recession or getting close to it has
forced regional central banks into rate-easing cycles, but this
has added more weakening pressure on the currencies and now
policy makers are facing a dilemma.
Weak currencies can hurt economies as well, as the region
has a high proportion of loans in hard currency by individuals
and companies which puts banking sectors under pressure.
After rate cuts have been priced in for a long time, Hungary
is now seen keeping them on hold on Monday [], while
votes showed on Thursday the Polish central bank was split 5-5
when voting for a rate cut in December [].
While internal policies get stuck in dilemmas, more
countries seek for international help. Romania said on Wednesday
it may need IMF help to protect foreign exchange reserves and
Serbia said it could boost its IMF package to $2 billion.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.742 28.864 +0.42% -6.92%
Polish zloty <EURPLN=> 4.701 4.779 +1.66% -12.47%
Hungarian forint <EURHUF=> 300.85 303.02 +0.72% -12.4%
Croatian kuna <EURHRK=> 7.473 7.427 -0.62% -1.45%
Romanian leu <EURRON=> 4.266 4.276 +0.23% -5.9%
Serbian dinar <EURRSD=> 94.8 94.488 -0.33% -5.61%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +21 basis points to 173bps over bmk*
4-yr T-bond CZ4YT=RR -36 basis points to +184bps over bmk*
8-yr T-bond CZ8YT=RR -7 basis points to +181bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +25 basis points to +1179bps over bmk*
5-yr T-bond HU5YT=RR +24 basis points to +1032bps over bmk*
10-yr T-bond HU10YT=RR +24 basis points to +884bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1307 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 Victoria Main)
