* Poland seen raising rates to 3.75 pct on Wed
* Analysts factor in pause in Hungary tightening cycle
* Currencies, bonds broadly unchanged as U.S. mkt closed
(Adds bonds, updates markets)
BUDAPEST, Jan 17 (Reuters) - Emerging European currencies
and bonds were broadly flat in cautious trade on Monday but
analysts said currencies could firm later in the week if Poland
raises interest rates on Wednesday as expected.
The Polish zloty <EURPLN=>, seen as the region's best
performer this year, gained 0.1 percent from Friday's close and
has advanced 2.3 percent since Jan. 1, just behind the
safe-haven Czech crown <EURCZK=>, which has edged up 2.7 percent
in 2011. []
Markets expect Poland on Wednesday to become the second
emerging European country to start monetary tightening and keep
inflation in check, following Hungary which began raising rates
in November.
A Reuters poll showed 17 of 29 analysts expect the Polish
central bank to raise its key interest rate by 25 basis points
on Wednesday, from a record low 3.5 percent. []
Bank BPH expects trading in the zloty to be relatively calm,
with the absence of U.S. investors due to a public holiday in
the United States on Monday dampening liquidity. It foreacasts
the zloty would trade between 3.85 and 3.88 versus the euro on
Monday.
A currency dealer in Budapest said a rate rise in Warsaw
could also boost the Hungarian forint <EURHUF=>, which generally
benefits from gains in the Polish currency.
"We're in for a quiet day as there is no U.S. market," the
dealer said. "In the near term, the forint can be influenced by
the Polish rate decision. If the zloty gains, the forint can
follow suit."
At 1008 GMT, the forint <EURHUF=> was flat, as was the Czech
crown. The Romanian leu <EURRON=> was up 0.1 percent.
BONDS, STOCKS LITTLE CHANGED
Bond yields around the region were broadly unchanged in
extremely thin trading, dealers said.
Stocks were little changed as well, with Romania's share
index <> up by half a percent on the day and Budapest stocks
<> adding a third of a percent. Shares in Warsaw <> rose
0.2 percent, while Prague's stockmarket <> dipped 0.1
percent.
Shares in Czech heavyweight electricity producer CEZ
<> were also flat, showing no reaction to news on
Friday that the company would tap the Eurobond market to the
tune of 1.25 billion euros as it sought to help fund its
pared-down investment strategy. []
Hungary's central bank meets next Monday to discuss policy
and analysts are beginning to factor in the possibility it may
pause after raising rates by a combined 50 basis points to 5.75
percent <NBHI> over the past two months.
Central bank Deputy Governor Ferenc Karvalits told Reuters
on Friday that the bank could move slowly with its cycle of
monetary tightening, possibly pausing for one or two months
between rate hikes. []
"We expect the central bank to stand still in January and
observe further inflation developments," Commerzbank wrote.
Czech industrial producer prices rose 1.0 percent
month-on-month in December and 3.6 percent year-on-year, above
market expectations, data showed on Monday. However, analysts
said the data would not change interest rate expectations.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.352 24.365 +0.05% +2.66%
Polish zloty <EURPLN=> 3.865 3.869 +0.1% +2.41%
Hungarian forint <EURHUF=> 275.39 275.43 +0.01% +0.94%
Croatian kuna <EURHRK=> 7.393 7.395 +0.03% -0.18%
Romanian leu <EURRON=> 4.255 4.26 +0.12% -0.52%
Serbian dinar <EURRSD=> 104.56 105.05 +0.47% +1.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to 42bps over bmk*
7-yr T-bond CZ7YT=RR -6 basis points to +78bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +75bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +358bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +334bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +614bps over bmk*
5-yr T-bond HU5YT=RR +4 basis points to +557bps over bmk*
10-yr T-bond HU10YT=RR +3 basis points to +484bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1108 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, Writing by Gergely Szakacs;
Editing by Susan Fenton)
