* Euro having less impact on CEE FX in pre-holiday trade
* Hungary warns cash-flow budget deficit to surge
* Markets await Poland, Hungary rate decisions next week
(Adds fixed income, detail)
WARSAW, Dec 16 (Reuters) - Central Europe's currencies were
little changed on Thursday due to uncertainty about interest
rate decisions next week in Poland and Hungary, and as investors
become reluctant to open new positions before the year end.
The euro -- the region's main reference currency -- usually
sets trends for the CEE currencies, but the correlation seems to
have weakened in recent days, dealers said.
"Clearly we have entered the pre-Christmas lull, trade is
thin and even moves on the euro are not affecting the region,"
said one Warsaw-based dealer.
Caution ahead of the holiday season meant even the Hungarian
forint was relatively stable despite continued concern about
government policies to tackle debt.
"Looking at Hungary, we should see a sell-off of its
currency, given the political situation there, but this is not
happening," the dealer said.
On Wednesday Hungary's independent Budget Council said the
country's cash-flow budget deficit could rise to 4.1 percent of
gross domestic product by 2012 and to 5.5 percent by 2013 after
the impact of one-off taxes and pension measures fades.
[]
Hungary's government has ended the transfer of employee
contributions to the mandatory private pension system, reversing
a key 1997 pension reform, and has levied heavy taxes on banks
and certain key sectors of the economy.
Analysts worry that Hungary could erode its pension assets
without structural reforms and face difficult financing problems
in the medium term. []
The forint <EURHUF=> lost some 3 percent of its value
against the euro after the plan was announced, but it has clawed
back half of its losses since then and traded at around 274.5 to
the euro by 0938 GMT on Thursday.
Other currencies hovered around previous closing levels,
with the Polish zloty <EURCZK=>, the Czech crown <EURCZK=> and
Romanian leu <EURRON=> each edging down 0.1 percent.
In the Czech Republic, the main opposition party -- the
Social Democrats -- will file a no-confidence motion against the
three-party coalition government on Thursday, but the government
is expected to survive thanks to a large majority in the lower
house. []
RATES TO STAY FLAT?
In Poland, the statistics office releases wages and
corporate employment data at 1300 GMT, with analysts expecting
readings to stand at 4.4 percent and 2.2 percent respectively.
However, dealers do not expect the data to have an impact on
the zloty as wage pressure remains weak and is not seen as a key
factor now for the central bank's Monetary Policy Council (MPC)
as it weighs up whether to raise interest rates next week.
A member of the MPC, Andrzej Bratkowski, told TVN CNBC late
on Wednesday there was the possibility of an early start in the
monetary tightening cycle, although he said a decision should
not be prejudged. []
The Polish central bank has kept rates steady at a record
low of 3.5 percent for the past 17 months and is expected to
start raising borrowing costs in early 2011.
The Polish MPC decides on interest rates on December 22.
In Hungary the central bank recently raised borrowing costs
to 5.5 percent, its first rate move in more than two years.
Markets are now closely watching whether the bank will
retain its more hawkish line and raise rates further at its next
policy meeting, scheduled for December 20.
Hungary's forward rate agreements price in a 50 basis point
rate increase in the next three months.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.145 25.13 -0.06% +4.66%
Polish zloty <EURPLN=> 3.986 3.981 -0.13% +2.96%
Hungarian forint <EURHUF=> 274.76 275.23 +0.17% -1.61%
Croatian kuna <EURHRK=> 7.382 7.39 +0.11% -0.99%
Romanian leu <EURRON=> 4.292 4.29 -0.05% -1.27%
Serbian dinar <EURRSD=> 103.86 105.36 +1.44% -7.68%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 79bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +67bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +80bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +358bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +340bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +294bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +633bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +567bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +481bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1038 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 []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Catherine Evans)
