* Weaker forint raises rate hike chances in Hungary
* Zloty holds above psychological 4 per euro level
* Irish deal fails to quash market worry
(Adds bonds, stocks, details)
By Jason Hovet
PRAGUE, Nov 29 (Reuters) - Emerging European currencies
found little relief on Monday from an Irish rescue deal that
failed to stem fears over the euro zone's debt crisis, while
Hungarian markets mostly priced in tighter interest rates.
The euro zone's battle with debt on its periphery has hurt
central Europe's reference currency, the euro, and shone a
spotlight on the region's efforts to reassure investors over its
own fiscal position, with Hungary at the sharp end.
Hungarian markets were pricing in a chance of an interest
rate hike on Monday when the central bank decides on policy
after a drop in the forint -- now down 3.4 percent this month --
and other Hungarian assets last week. []
Markets were spooked on Friday by planned pension scheme
changes, which will push private pension fund members back into
the state scheme. It was Hungary's centre-right government's
latest controversial policy move since taking power this year.
The government is aiming to the cut the budget deficit to
below 3 percent of economic output from next year while avoiding
spending cuts of the kind other European countries are making.
"The currencies of Hungary, Poland and Romania -- all
(facing) ... an uncertain budget outlook -- are coming under
increasing pressure," Commerzbank said.
"The Czech Republic on the other hand boasts solid national
finances and as a result the (crown) is comparatively solid."
By 1026 GMT, the forint <EURHUF=> was steady on the weak
side of 280 to the euro, and the Polish zloty <EURPLN=> was
flat, above the 4.0 per euro level.
The Czech crown <EURCZK=> was steady at 24.715, while only
the Romanian leu <EURRON=> bounced, by half a percent from a
one-month low hit last week.
Dealers said they expected a steady forint before Monday
afternoon's interest rate decision, and anticipated hawkish
comments from the Hungarian central bank.
Forward rate agreements priced in a rate hike of about 50
basis points, and yields on bonds of up to five years' maturity
rose to their highest since September 2009.
A Nov 22-24 Reuters poll showed 20 out of 21 analysts
expected the bank (NBH) to keep rates at a record low of 5.25
percent. One forecast a 25 basis point rise. []
TECH PRESSURE
The zloty's break above the 4.0 level last week sent it to a
four-month low and broke through technical levels. Losses were
capped at 4.05.
Further depreciation could put pressure on Poland's debt,
breaking thresholds that would trigger harsh spending cuts. The
currency is still seen trading around an area described as
'safe' by Polish policymakers but analysts said it was facing
more pressure. []
"The technical picture remains negative," SEB said. It said
more deterioration could prompt the finance ministry to
intervene against losses, as it did in May when the zloty moved
into the 4.17 to 4.20 range.
"It has muscles and also a strong motive to prevent further
zloty losses, since that increases foreign debt measured in PLN
and thereby increases the public debt to GDP," SEB said.
RBC recommended buying the zloty against the crown on
Monday, saying a shift in the start of rate-tightening from this
year to late in the first quarter of 2011 have caused the zloty
to underperform, but that the bulk of the correction is over.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.76 24.733 -0.11% +6.29%
Polish zloty <EURPLN=> 4.028 4.028 0% +1.89%
Hungarian forint <EURHUF=> 280.25 280.33 +0.03% -3.53%
Croatian kuna <EURHRK=> 7.428 7.427 -0.01% -1.6%
Romanian leu <EURRON=> 4.292 4.313 +0.49% -1.27%
Serbian dinar <EURRSD=> 107.19 106.91 -0.26% -10.55%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 84bps over bmk*
7-yr T-bond CZ7YT=RR +7 basis points to +79bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +98bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +375bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +363bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +336bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +660bps over bmk*
5-yr T-bond HU5YT=RR +10 basis points to +623bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +536bps 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 Catherine Evans)
