* FX mixed, mkt digests rate comments, decisions
* More weakening likely, say dealers
* Polish cbank does not rule out future fx intervention
* Croatia unveils anti-crisis package
(Adds new comments, fresh prices.)
By Sandor Peto and Dagmara Leszkowicz
BUDAPEST/WARSAW, Feb 26 (Reuters) - Central Europe's
currencies inched up late on Thursday, bolstered by a cautious
rise in global investors' appetite for risk and comments on
intervention by the Polish central bank governor.
A rise by equities in Europe and a positive opening of
stocks in the U.S. gave support to currencies across the
emerging region, helping erase earlier losses for the Polish
zloty <EURPLN=>.
The zloty also drew some strength, dealers said, from
central bank Governor Slawomir Skrzypek, who said the bank might
intervene in the currency market to support the zloty in certain
conditions. []
But markets are sceptical on the chances of outright
intervention by central banks at these levels, and currencies
stayed in relatively tight ranges after recent sharp losses.
The zloty and the Romanian leu were flat against the euro at
1506 GMT at 4.692 and 4.286, respectively, while the Czech
crown<EURCZK=> firmed 0.29 percent to 28.289. The Hungarian
forint<EURHUF=> and the Croatian kuna<EURHRK=> both gained half
a percent, to 299.63 and 7.35, after Croatia's government
unveiled measures to counter the impacts of the global crisis.
Dealers and strategists said all would remain under pressure
as the global crisis hits the region's export-heavy economies
and concerns persist over their reliance on foreign financing.
"The trend (of weakening currencies) hasn't changed really
so the recent strengthening could be a short-term correction,"
said Sylwester Brzeczkowski, dealer at ABN Amro in Warsaw.
If the currencies continue to slide, a key question is what
governments and central banks in the region are ready to add to
Monday's coordinated verbal intervention by central banks in the
region.
The Polish government has moved the zloty by selling some of
its EU fund inflows on the open market, and Czech Finance
Minister Miroslav Kalousek said late on Wednesday that the
government was considering all possible tools to help the
undervalued crown.[]
DILEMMA
Poland's quarter-point interest rate cut on Wednesday
highlighted the dilemma of banks which have been cutting rates
to help the ailing economies but are worried lower interest
rates -- which also cuts the premium paid for held assets --
could fuel more currency weakness.
"The central bank comments referring to further rate cuts
weakened the Polish unit (on Wednesday), which counters Monday's
coordinated regional central bank statement," Hungarian MKB Bank
said in a note.
Hungary's central bank kept its rates on hold at its meeting
early this week, pausing in its earlier monetary easing cycle
due to concerns over the forint's weakness and its impact on the
loan portfolio quality of domestic banks.
But the woes of the economy maintain pressure on the bank to
cut interest rates further. Rate setter Julia Kiraly said there
were downside risks to its forecasts for growth, which already
predict a recession in 2009 and 2010 [].
The Polish central bank has lowered borrowing costs by a
total of 200 basis points in the current easing cycle, bringing
the key interest rate to 4.0 percent.
However Wednesday's cut was not as sharp as the previous
ones, as the council pointed to recent zloty weakening and
concerns over its volatility. []
"While the sell-off has so far been indiscriminate and
Emerging Europe assets are likely to remain under pressure for
some time, past episodes show that market moves should eventually
reflect country-specific conditions," said Neil Shearing,
analyst at Capital Economics in a note.
Analysts view Poland and Czech Republic as being in better
position to manage the global downturn than states like Romania
or Hungary, which have ran higher current account deficits.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.289 28.37 +0.29% -5.43%
Polish zloty <EURPLN=> 4.692 4.692 0% -12.3%
Hungarian forint <EURHUF=> 299.63 301.12 +0.5% -12.04%
Croatian kuna <EURHRK=> 7.35 7.387 +0.5% +0.2%
Romanian leu <EURRON=> 4.286 4.289 +0.07% -6.34%
Serbian dinar <EURRSD=> 93.579 93.849 +0.29% -4.38%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -10 basis points to 239bps over bmk*
4-yr T-bond CZ4YT=RR -12 basis points to +235bps over bmk*
8-yr T-bond CZ8YT=RR -12 basis points to +295bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -36 basis points to +1176bps over bmk*
5-yr T-bond HU5YT=RR -75 basis points to +1026bps over bmk*
10-yr T-bond HU10YT=RR -61 basis points to +834bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1606 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Sandor Peto and
Dagmara Leszkowicz; editing by Stephen Nisbet)
