* Dollar retreat, positioning lift CEE currencies
* Czech crown gives up gains, recent rate cut weighs
(Adds new prices, comments and background)
By Sandor Peto
BUDAPEST, Dec 18 (Reuters) - Central European currencies
firmed up on Friday as the dollar retreated after surging
against the euro the previous day, while German economic
sentiment figures suggested improving export prospects for the
region.
Hungary's forint <EURHUF=> led the gains, rising 0.8 percent
against the euro by 1104 GMT. The Polish zloty <EURPLN=> gained
0.4 percent, and the Romanian leu <EURRON=> rose 0.2 percent.
Equities were mixed. The Polish stock index <> rose
about 0.1 percent and Czech stocks <> shed half a percent,
while Budapest <> rose 0.4 percent as Goldman Sachs
recommended investors buy Hungarian blue chip MOL <MOLB.BU>.
[]
The Czech crown <EURCZK=> meanwhile gave up mild early gains
and traded flat as Wednesday's surprise central bank interest
rate cut still weighed on the currency while fiscal policy, like
everywhere in the region, has caused concern recently.
Dealers said year-end positioning helped local currencies
after their recent falls, although the units remained fragile.
"Sentiment is Christmassy, liquidity is low, and those who
had sold aggressively have probably finished (position
building)," one Budapest-based dealer said.
"But of course, it's Friday when it happens very often that
news just reverses things."
The market mood was also improved by good Ifo corporate
sentiment figures from Germany, the region's key export market,
dealers said. []
A recent Reuters poll showed the zloty was seen
outperforming next year, followed by the crown. []
FISCAL CONCERNS, RATE DECISION
Late on Wednesday S&P became the second rating agency this
month to downgrade Greece. A spate of bad news about the budgets
of states in the euro zone's periphery in recent weeks has also
caused jitters in recession-hit Central Europe.
"Greece still appears to be the hottest story in the market
-- more bad news out of Greece is likely to continue to
weigh on the EMEA markets," Danske Bank said in its daily
regional note.
Fiscal slippage remains a key risk in the European Union's
eastern members, where economic problems and elections next year
could sap reforms and may push some states towards a Greek-style
debt trap. []
Government bond prices changed little in the region on
Friday after a retreat in past weeks as the appetite of foreign
investors weakened ahead of the year-end.
Polish 10-year bond yields have risen 10 basis points in
December, and the corresponding Hungarian yields have risen 50
basis points in the past month.
Dealers said Polish bond prices would remain under pressure
as investors are pricing in expected large debt issues in 2010.
Poland's borrowing needs may be 25 percent higher in 2010 than
in 2009, when they stood at about 160 billion zlotys.
Hungary's debt agency confirmed on Friday that its 2010
forint issuance plan would rely on domestic demand rather than
foreign capital inflows. []
The country's markets brushed off the news, instead looking
ahead to Monday's rate-setting meeting where most analysts
expect the central bank (NBH) to cut its base rate by 50 basis
points again, though many bond traders see a cut of only half
that size. []
"A cut of 50, or 25 as I expect would not have an impact,
while a hold decision would push up yields by 5-10 basis points
and could even weaken the forint," one trader said, adding that
a decision to hold rates would show recent forint falls have
scared the bank.
But a currency dealer said the forint could firm if the bank
keeps rates on hold. "That would keep the carry high, though
frankly, this year I'm no longer interested too much."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.251 26.244 -0.03% +1.91%
Polish zloty <EURPLN=> 4.186 4.203 +0.41% -1.7%
Hungarian forint <EURHUF=> 276.29 278.4 +0.76% -4.61%
Croatian kuna <EURHRK=> 7.285 7.288 +0.04% +1.1%
Romanian leu <EURRON=> 4.204 4.213 +0.21% -4.51%
Serbian dinar <EURRSD=> 95.92 95.73 -0.2% -6.71%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +7 basis points to 117bps over bmk*
7-yr T-bond CZ7YT=RR +11 basis points to +107bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +83bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +392bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +371bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +589bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +541bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +476bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1204 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary [] Top
events [] Diaries [] Diaries Index []
(Reporting by Sandor Peto; Editing by Hugh Lawson)
