BUDAPEST, Oct 27 (Reuters) - Emerging European currencies
opened weaker on Wednesday as local markets eyed a knife-edge
interest rate decision in Poland and a no-confidence vote on
Romania's government.
The market is divided over how Poland's central bank will
react to recent strong data at its rate-setting meeting, with 8
analysts forecasting no change in rates and 7 projecting a 25
basis point hike, according to a Reuters poll. Its decision is
due at 1200 GMT. []
A run of strong Polish economic data, an unexpected jump in
inflation in September and some central bankers' calls for quick
monetary tightening from a record low of 3.5 percent have
strengthened expectations that the Monetary Policy Council will
hike rates. []
"We assign a one-third probability that the MPC acts,"
Goldman Sachs said in a note. "If the MPC decides to hike before
the year-end, we believe it would opt for a 50bp hike, rather
than signal a tightening cycle with a 25bp move."
Nordea projected in a morning note that a higher projected
inflation will tip the council towards a 25 basis point hike.
"Markets are not currently pricing in the hike and hence we
would expect higher market rates and a stronger PLN (zloty) in
case a hike is announced," Nordea said.
The zloty <EURPLN=> lead losses in the region, easing 0.4
percent by 0722 GMT, followed by a 0.2 percent slide in the
Hungarian forint <EURHUF=> and the Romanian leu <EURRON=>. The
Czech crown <EURCZK=> was 0.1 percent weaker.
Romania's centrist government looks likely to survive a
no-confidence vote in parliament on Wednesday over its deep
spending cuts and tax hike, needed to maintain a 20 billion euro
IMF-led bailout. []
"(The government's) survival is already priced in so the leu
wouldn't go any further than 4.25-4.26," one Bucharest dealer
said. "Otherwise, it will go towards 4.35-4.4."
Dealers expect the central bank to intervene to stem any
weakening pressures from a government collapse, but the leu
could still flirt with all-time lows in such a scenario.
Even if the government survives, its slim majority and a
busy reform agenda under close IMF scrutiny will keep Romanian
assets under pressure for at least another year, analysts say.
In Hungary, the forint remains under pressure as the IMF's
criticism's of the country's fiscal stance on Monday are still
weighing on the market, a dealer said.
Investors are also concerned by the ruling Fidesz party's
move on Tuesday to prevent the Constitutional Court from ruling
on changes in the pension system and other budgetary issues.
[]
Czech dealers said a close above the 24.65 per euro
resistance level left the crown vulnerable to further losses.
The government in Prague asked parliament on Tuesday to
quickly push through fiscal austerity laws. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.67 24.646 -0.1% +6.68%
Polish zloty <EURPLN=> 3.949 3.933 -0.41% +3.93%
Hungarian forint <EURHUF=> 275.5 274.93 -0.21% -1.87%
Croatian kuna <EURHRK=> 7.338 7.34 +0.03% -0.39%
Romanian leu <EURRON=> 4.28 4.271 -0.21% -1%
Serbian dinar <EURRSD=> 106.92 106.93 +0.01% -10.33%
All data taken from Reuters at 0922 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marton Dunai; Editing by Hugh Lawson)
