* Stronger risk appetite gives support to regional assets
* Leu lags as political crisis drags on, IMF on standby
* Czech inflation dips into negative, bond yields lower
By Sandor Peto and Marton Dunai
BUDAPEST, Nov 9 (Reuters) - Central European currencies and
stocks firmed on Monday after a revival in global risk appetite,
while upcoming figures promising improved economic performance
in the region in the third quarter also boosted sentiment.
However, Romania's leu <EURRON=> underperformed due to
political strains.
The region's currencies fell to multi-month lows versus the
euro late last month, but the dollar's retreat beyond the key
1.5 level versus the euro bolstered sentiment.
Central Europe's main equity indices rose by 2-4 percent on
Monday as stocks in developed markets also firmed.
Poland's zloty <EURPLN=> led currency gains, firming one
percent against the euro to 4.205 by 1451 GMT. Hungary's forint
<EURHUF=> strengthened by 0.9 percent, while the Czech crown
added 0.7 percent.
The zloty and the forint could soon test levels where they
were before their slump last month, dealers said. The crown is
already firmer than last month's lows, while the leu <EURRON=>
-- which on Monday firmed by 0.1 percent -- changed little.
"The zloty can test 4.18, the forint 270, and we will see
the direction at that point," one Budapest-based dealer said.
Another dealer said global sentiment, which remains decisive
to the region, could remain changeable in the rest of the year.
"It's fragile... risk on and risk off modes are following
each other, now it's risk on, but it can change."
Romania's political gridlock might hold the leu back as
Prime Minister designate Liviu Negoita unveils a cabinet line-up
on Monday with little chance of Parliament's approval.
The stalemate prompted the IMF on Friday to withhold funds
that were slated for Romania next month. []
Romanian industrial production contracted at its slowest
rate in a year, data showed earlier on Monday. []
GDP, INTEREST RATES EYED
Domestic figures published in the past days provided reason
for some optimism over economic performance in the region, while
political turmoil in Romania and concerns over state budgets in
the region maintain risks.
The region's currencies are expected to post gains in the
next 12 months according to a recent Reuters poll.
Hungary is expected to publish on Friday third-quarter gross
domestic product (GDP) figures which could show 6.4 percent
annual contraction, after 7.5 percent in the second quarter.
Czech data on the same day could show a pull out of negative
territory according to a poll of economists [].
Analysts raised forecasts for Polish growth for each quarter
until the second half of 2010.[]
Hungarian bond yields dropped five basis points as the
forint firmed, strengthening the case for an expected interest
rate cut at a central bank meeting late this month.
Czech bonds also firmed. Czech inflation dipped into
negative territory for the first time in six years, although
analysts and the central bank expect an uptick in prices in the
coming months. []
"The combination of low inflation and a firming crown play
into lowering of interest rates. We expect the central bank,
though, to prefer verbal intervention before cutting rates,"
Raiffeisenbank bank said in an afternoon market note.
Polish bonds were stable on Monday with the market awaiting
Tuesday 2-year bond tender.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.553 25.736 +0.72% +4.7%
Polish zloty <EURPLN=> 4.205 4.248 +1.02% -2.14%
Hungarian forint <EURHUF=> 272.15 274.68 +0.93% -3.16%
Croatian kuna <EURHRK=> 7.26 7.268 +0.11% +1.45%
Romanian leu <EURRON=> 4.292 4.297 +0.12% -6.47%
Serbian dinar <EURRSD=> 93.57 93.74 +0.18% -4.37%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -2 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR +4 basis points to +108bps over bmk*
10-yr T-bond CZ10YT=RR -6 basis points to +94bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +367bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +319bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +280bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +5 basis points to +532bps over bmk*
5-yr T-bond HU5YT=RR +6 basis points to +470bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +407bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Reuters buros, writing by Marton Dunai/Sandor
Peto; editing by Toby Chopra/Ruth Pitchford)
