* Hungarian forint leads gains, may benefit from 'carry'
* Adjustments in CEE countries key in terms of euro plans
* Rate cut hopes boost Hungary papers
(Updates quotes, prices)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, Nov 16 (Reuters) - The Hungarian forint
strengthened on Monday to lead emerging Europe, lifted by a
weaker dollar and better sentiment for the region as signs of
economic recovery slowly build.
With interest rates well above peers like the Czech Republic
and Poland, some dealers said investors were also taking
advantage of the forint's carry premium.
That, they said, was keeping it in favour after Hungary
posted disappointing gross domestic product compared to peers on
Friday when a raft of data across the region came.
The Czech and Slovak economies grew versus a quarter ago,
Romania was contracting less than expected, while Hungary and
Bulgaria were struggling to pick up. []
"The forint is chasing the zloty but -- what's even more
important -- its more attractive currency in terms of a carry
trade as its the unit with the best percentage among CEE's,"
said one Warsaw-based dealer.
"And for as long as the dollar is relatively weak to the
euro, such a situation should continue."
Hungary's main interest rate stands at 7.0 percent but is
seen moving lower next week, which has supported bond prices.
The main rate is twice as much as in Poland, where the key
interest rate is still at its all-time low of 3.5 percent.
Hungary's central bank deputy governor Ferenc Karvalits said
on Monday a benign inflation outlook and improved risk
assessment allowed the central bank to proceed with cautious
interest rate cuts. []
Hungarian bonds moved sideways on Monday, while the forint
<EURHUF=> was 1.0 percent stronger to the euro at 266.0 by 1451
GMT.
Poland's zloty <EURPLN=> and the Czech crown <EURCZK=> were
both 0.1-0.2 percent up against the common currency.
Stocks rose strongly on Monday, with Warsaw's main index
<> leading the way with a 2.6 percent gain. Prague's PX
<> bucked the trend, moving around its previous close.
EURO PLANS, POLITICS
In Romania, the central bank sold fewer six-month t-bills
than planned, with the average accepted yield at 10 percent, the
ministry's known cutoff point. []
The level has been tested over the past month after a
government collapse and political stalemate in forming new
leadership before a presidential election starting on Sunday.
The Romanian leu <EURRON=> has continued to trade in a
narrow range as fear of central bank interventions continued to
offset worries about political turmoil.
Romania's central bank deputy chief Cristian Popa said the
bank's decision in November to keep its key interest rate on
hold was not meant to signal a policy shift. []
Central European economies have slowly started getting back
on their feet after a year of lost foreign demand and wide
market swings.
On Monday EU and central European policymakers warned the
European Union's eastern members at a conference in Vienna on
Monday that they needed to adjust their timetables for joining
the euro currency to avoid the risk of creating new bubbles with
overly ambitious plans. [] []
Hungary's central bank chief Andras Simor said it was
unrealistic for the country to give a target date before
elections, due next year [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.453 25.475 +0.09% +5.11%
Polish zloty <EURPLN=> 4.095 4.102 +0.17% +0.49%
Hungarian forint <EURHUF=> 266.08 268.87 +1.05% -0.95%
Croatian kuna <EURHRK=> 7.297 7.295 -0.03% +0.93%
Romanian leu <EURRON=> 4.293 4.294 +0.02% -6.49%
Serbian dinar <EURRSD=> 94.233 94.21 -0.02% -5.04%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -9 basis points to 98bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +111bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +94bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +372bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +274bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +524bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +465bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +397bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1451 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 and
Dagmara Leszkowicz; editing by Toby Chopra)
