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By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Dec 2 (Reuters) - Central European
currencies weakened on Tuesday, depressed by poor stock
performance, with the Serbian dinar hitting an all-time low and
Romanian markets mostly sidelined.
Stocks, a key driver for currencies in recent weeks,
weakened after manufacturing data showed slowing euro zone
demand [] and after U.S. shares tumbled on Monday on
confirmation the world's largest economy was in recession.
"Stocks are now a reflection of growth expectations and
Monday's PMI data triggered a weakness trend in stocks which was
transmitted into currencies," said Elizabeth Gruie, EMEA
strategist at BNP Paribas in London.
The Serbian dinar <EURRSD=> fell 1 percent, hitting an
all-time low of 91.09 per euro, a day after the central bank
decided to keep its two-week repo rate <RS2WTS=NBYA> at 17.75
percent [].
The unit has been hardest hit in recent months, falling 18
percent to new lows since Oct. 1 despite the central bank
spending around 600 million euros in that time to stem declines.
The bank appeared to have intervened again on Tuesday.
In Romania, markets re-opened after a Monday holiday but
foreign players stayed on the sidelines waiting for more
developments in coalition talks as there was no clear outcome
from the weekend's parliamentary election [].
The leu <EURRON=> fell 0.8 percent at 3.805 to the euro,
catching the regional trend, but dealers warned additional
weakness pressure was on the cards if coalition talks drag on.
"There is no clear winner for the election ... for the time
being this is broadly market neutral," UniCredit said in a
research note.
By 1451 GMT, Poland's zloty <EURPLN=> lost 1 percent as well
to 3.837 per euro, while Hungary's forint <EURHUF=> and the
Czech crown <EURCZK=> were virtually steady.
STABLE GROUND
Currencies have found some stability in the past month after
getting hammered in October when the global credit crunch crept
into central Europe, raising worries over countries like Hungary
and Romania that have higher external financing needs.
An IMF deal for Hungary brought more calm, and the forint,
which shed around 15 percent in October, has lost 2.3 percent
since Nov. 1. The crown is off over 6 percent in that time, the
leu some 4 percent, while the zloty has lost some 8 percent.
In bond markets, Hungarian bond yields recovered from falls
of about 30 basis points early in the session after a
three-month T-bill auction was oversubscribed [],
but traders said turnover remained generally low.
Czech and Polish yields remained mostly steady, but in
Poland yields are likely to rise, traders said, as the next
monetary council sitting approaches and the market bets on
another rate cut.
"The closer we get to the council's sitting the more likely
the rate cut is," a bond dealer in Warsaw said. "Bond yields
will rise in reaction to the cut, especially on papers with
maturity of up to three years."
On Monday, the Czechs unveiled a more cautious debt issuance
strategy for next year, while Poland said on Tuesday it may sell
at least 1 billion euros worth of bonds in the first quarter of
2009 [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.662 25.65 -0.05% +3.15%
Polish zloty <EURPLN=> 3.837 3.798 -1.03% -6.57%
Hungarian forint <EURHUF=> 261.66 262.26 +0.23% -3.48%
Croatian kuna <EURHRK=> 7.175 7.132 -0.6% +2.07%
Romanian leu <EURRON=> 3.822 3.791 -0.82% -6.75%
Serbian dinar <EURRSD=> 90.693 89.775 -1.02% -15.15%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR 0 basis points to +208bps over bmk*
5-yr T-bond CZ5YT=RR -23 basis points to +167bps over bmk*
10-yr T-bond CZ9YT=RR +8 basis points to +142bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +369bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +331bps over bmk*
10-yr T-bond PL10YT=RR +12 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +30 basis points to +923bps over bmk*
5-yr T-bond HU5YT=RR +21 basis points to +847bps over bmk*
10-yr T-bond HU10YT=RR +38 basis points to +601bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1651 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; editing by Tony Austin)
