* Zloty inches up before c.bank; rate hike priced in
* Forint flat, just off 11-month high
* Leu gains after strong bill sale
(Adds bonds, details)
By Jason Hovet
PRAGUE, April 5 (Reuters) - The zloty inched higher on
Tuesday ahead of an expected rate hike from the Polish central
bank, though dealers said markets have mostly priced in a second
move this year by the bank.
Other emerging European currencies were mixed as the euro,
the region's reference currency, pulled back from a five-month
high and stock markets dipped in early trade.
Twenty-three of 29 analysts in a Reuters poll last week
expected Poland to raise borrowing costs by a quarter percentage
point amid concerns over accelerating inflation. []
The zloty <EURPLN=> added 0.1 percent on Tuesday after a dip
in the previous session. Hungary's forint <EURHUF=> was flat.
"We keep expecting the balance in the (Monetary Policy
Council) MPC to favour hawks and look for a 25 basis point hike
to 4.0 percent, especially now that the zloty has underperformed
in recent weeks," SEB said in a trade note.
"A hike should not, however, create much market movement as
it is largely expected."
The zloty has bounced around in the past month with
expectations of higher rates, but it is also weighed down by
concern over a possible revision to current account data and
snags in the government's $5 billion privatisation plan.
[]
FORINT HOLDS STRONG
Hungary's forint is near an 11-month high and has been a top
performer with a 3 percent gain in the past three weeks, more
than double the pace of the leu, as the economic outlook
improves for both countries.
On Tuesday it <EURRON=> added 0.2 percent, extending gains
following a strong treasury bill sale on Monday.
The Czech crown <EURCZK=> edged down 0.1 percent.
Polish bonds were stable, with the yield on the 10-year bond
steady after falling 5 basis points on Monday when the second
quarter debt supply showed no regular tenders of the paper.
In Hungary, the strength of the currency has given a lift to
debt markets, with the 5-year bond yield at a two-month low.
Attention will turn to Hungarian budget data due on
Thursday. The budget deficit as of the end of February hit 81.4
percent of the government's full-year target, and analysts
expect it to increase for the full quarter. []
"At the same time the market knows that extraordinary
revenues (pension fund assets, crisis taxes) will later reverse
the current ugly budget situation," CIB Bank said.
Markets expect a euro zone interest rate rise this week but
analysts do not expect this to lead to knee-jerk reactions from
central European monetary policymakers. []
Most analysts believe that Hungary's central bank has
already finished its 75 basis point tightening cycle.
The Czechs have yet to start tightening and markets are not
pricing a change in until the middle of the year, while Romania
left rates flat last week and is not expected to move any time
soon.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.452 24.417 -0.14% +2.24%
Polish zloty <EURPLN=> 4.021 4.025 +0.1% -1.57%
Hungarian forint <EURHUF=> 265.00 265.01 0% +4.9%
Croatian kuna <EURHRK=> 7.365 7.369 +0.05% +0.2%
Romanian leu <EURRON=> 4.115 4.124 +0.22% +2.87%
Serbian dinar <EURRSD=> 102.27 102.31 +0.04% +3.58%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to -4bps over bmk*
7-yr T-bond CZ7YT=RR +7 basis points to +66bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +71bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +321bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +308bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +282bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1129 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Hugh Lawson)
