* FX gain on positive investor sentiment, local outlook
* Key technical levels seen holding strong in zloty, forint
* Market looks for clues of Polish, Czech rate hike timing
(Recasts throughout)
By Marton Dunai and Krisztina Than
BUDAPEST, Feb 1 (Reuters) - Poland's zloty led gains for
East European currencies on Monday amid signs of an improved
economic outlook for the region as export markets in the euro
zone come back to life.
Analysts consider the zloty <EURPLN=> a potential top gainer
this year after Poland escaped recession altogether in 2009 and
looked set to grow more this year.
The brighter the outlook for growth, the more likely its
central bank may be to raise interest rates later this year and
the currency gained 0.9 percent and briefly broke the key 4.00
level against the euro on Monday, its strongest in a year.
"We remain constructive on the economy, and expect the MPC
to begin to raise rates in the second half of 2010," Goldman
Sachs said in a note.
"The risks are skewed towards an earlier hike. We remain
bullish on the zloty."
Other currencies gained more moderately as markets took note
of a spate of positive manufacturing indices which pointed to a
pickup in production across Central and Eastern Europe as its
key export markets recover from last year's slump.
The index of Czech purchasing managers (PMI) improved for
the third straight month in January, while a separate survey in
Hungary showed its index jumped above 50 -- the threshold
dividing contraction from growth -- for the first time in 18
months. [] []
"The EU's fiscal concerns aside, at least the manufacturing
rebound is on track as... emerging EMEA finally moves into
expansionary territory," Barclays Capital said in a note.
At 1029 GMT, the Czech crown <EURCZK=> was 0.1 percent
stronger, while the Hungarian forint <EURHUF=> eased a touch.
The Romanian leu <EURRON=>, benefitting from the region's
highest interest rates as well as the recent end of a political
stalemate and unlocking of its international aid package,
followed the zloty to gain 0.6 percent.
Also supporting the zloty was news Poland will hold the
bookbuilding process for a 16-percent stake in Enea <ENAE.WA>
between Feb 4 and Feb 9, according to company documents.
[]
BONDS MIXED
Strong as the recovery is, key technical levels stemmed the
zloty's gains at 4 EUR/PLN and the forint bounced back from 270
EUR/HUF, dealers said.
"It seems the move below 4.00 to the euro is slightly
exaggerated and I think the zloty will move at 4.00-4.02 against
the euro on Monday," a Warsaw-based dealer said.
The zloty gained despite a stronger dollar, which usually
cuts appetite for central Europe's riskier assets. CSOB dealer
David Sykora said the correlation with the dollar has been
broken by worries around euro zone member Greece.
"The euro zone is facing troubles and this may be why people
placing their money somewhere else," Sykora said.
Polish bonds were stronger, tracking the zloty. Dealers said
the debt market was not affected by the finance ministry's
unchanged inflation forecast [].
Hungarian bond yields also dropped a few points, benefitting
from Polish gains, while Czech bonds were a touch weaker
While Hungary's central bank is seen easing the key policy
rate to 5.5 percent in the first half from the current 6
percent, markets in Prague were looking ahead to Thursday's rate
setting meeting for clues of how soon rates could be raised.
"Clarity around the timing of the first rate hikes should
emerge after the inflation report in May, with the first hikes
being delivered in 3Q at the earliest, although 4Q is more
likely," UniCredit said in a note to clients.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.102 26.135 +0.13% +0.83%
Polish zloty <EURPLN=> 4.007 4.041 +0.85% +2.42%
Hungarian forint <EURHUF=> 270.91 270.77 -0.05% -0.21%
Croatian kuna <EURHRK=> 7.314 7.314 0% -0.07%
Romanian leu <EURRON=> 4.078 4.103 +0.61% +3.91%
Serbian dinar <EURRSD=> 98.5 98.33 -0.17% -2.66%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +9 basis points to +100bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +137bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +128bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +378bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +325bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +287bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +503bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +446bps 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 Marton Dunai; editing by Patrick Graham)
