* FX holds on to this week's gains in early trade
* Hungary's May inflation came well above forecast
* Czech industry plunges over 20 percent y/y in April
By Marius Zaharia
BUCHAREST, June 11 (Reuters) - The forint held steady in
early trade on Thursday, supported by benign sentiment in
eastern Europe, while surprisingly high inflation data in
Hungary strengthened the case for keeping rates on hold.
Hungary's annual inflation jumped to 3.8 percent in May from
3.4 percent in April, overshooting a consensus of 3 percent.
"May CPI came out at shockingly high," said Mariann Trippon
of CIB. "We have to wait at least another month for the first
rate cut." <HUCPIY=ECI> <HUCPIC=ECI>
Hungarian central bank governor Andras Simor said on
Wednesday interest rate cuts would be "very risky" for financial
stability and any easing would depend on a stabilisation of
investors' risk perception. []
By 0734 GMT, the forint <EURHUF=> edged down less than 0.1
percent from Wednesday's domestic close. The Polish zloty
<EURPLN=> rose some 0.4 percent while local markets were closed
for a public holiday, the Czech crown <EURCZK=> gained 0.3
percent and Romania's leu <EURRON=> was steady.
In Czech Republic, data showed industrial output plunged
some 22 percent in April, slightly better than last month's
flash estimate. [] <CZIPY=ECI>
Worries over a possible currency devaluation in Latvia have
faded over the past two days, lifting downward pressure on
central European assets. The high-yielding Hungarian forint has
led gains because it also benefited from some cross trades
against the Polish zloty.
Overnight, the IMF published Romania's letter of intent for
the financial aid secured by the Black Sea state in March, which
envisaged a faster drop in inflation due to the deepening
economic downturn [].
Romania's central bank would be allowed to intervene in the
currency market to defend the leu, but any reserve losses
exceeding 2 billion euros in any 30-day period would trigger
consultation with IMF staff, it said.
The global mood was also supporting European emerging
markets.
"Positive vibes from global markets are keeping the higher
beta equity/FX stories in EME better bid, with Budapest and
Bucharest leading the way," Chevreux said in a morning note.
"Besides the implications from continued EU/IMF financing,
we see little reason however for Hungary's outperformance."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.722 26.79 +0.25% +0.12%
Polish zloty <EURPLN=> 4.48 4.496 +0.36% -8.15%
Hungarian forint <EURHUF=> 279.65 279.4 -0.09% -5.76%
Croatian kuna <EURHRK=> 7.263 7.26 -0.04% +1.4%
Romanian leu <EURRON=> 4.194 4.196 +0.05% -4.28%
Serbian dinar <EURRSD=> 93.846 93.886 +0.04% -4.65%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +37 basis points to 127bps over bmk*
4-yr T-bond CZ4YT=RR +6 basis points to +138bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +251bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +10 basis points to +342bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +251bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +208bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +26 basis points to +937bps over bmk*
5-yr T-bond HU5YT=RR +22 basis points to +849bps over bmk*
10-yr T-bond HU10YT=RR +21 basis points to +646bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1034 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
Editing by Ruth Pitchford)
