* Markets mixed as dollar rise cuts emerging appetite
* Poland holds main rates; bonds dip then recover
* Romanian govt seen surviving no-confidence vote
(Updates with Polish cbank)
By Marton Dunai and Jason Hovet
BUDAPEST/PRAGUE, Oct 27 (Reuters) - The zloty fell and
Polish bond yields dipped after the country's central bank kept
its main interest rate on hold, disappointing many in the market
who had anticipated the start of a tightening cycle.
The bank did move to tighten liquidity in its banking
sector, however, raising the minimum reserve requirement for
banks by 50 basis points to 3.5 percent.
The Polish currency had already led emerging European losses
ahead of the decision as a rising dollar cut appetite for
riskier assets.
Regional investors also stayed cautious ahead of a
no-confidence vote against Romania's shaky government coalition.
The market had been divided over how Polish rate-setters
would react to recent strong data. Eight analysts forecast no
change in rates and seven projected a 25 basis point hike,
according to a Reuters poll last week.
An unexpected jump in inflation in September and some
central bankers' calls for quick monetary tightening from a
record low of 3.5 percent had strengthened indications a rate
hike was close. [] []
"Today's decision shows that the (Monetary Policy) Council
is still dominated by a wait-and-see approach. Most probably,
most policymakers argue for keeping rates flat with moderate
growth rate and the risk of weaker global growth," said Maja
Goettig, chief economist at Bank BPH.
"They also probably argue that there would be a risk of too
quick a zloty appreciation after a possible decision to hike."
The zloty <EURPLN=> extended losses to bid down 0.4 percent
at 3.949 to the euro by 1252 GMT, while Polish bond yields
recouped earlier losses. Interest rate swaps (IRS) lost 7-8
basis points at the shorter end of the curve.
Hungary's forint <EURHUF=> inched up 0.1 percent while the
Czech crown <EURCZK=> was flat at 24.633.
The forint remains under pressure, with the IMF's criticism
of fiscal reforms on Monday still weighing on the market. Bond
yields rose as much as 15 basis points at the short end of the
curve after the government's latest fiscal measures stirred
markets. []
Investors were also concerned by the ruling Fidesz party's
move on Tuesday to prevent the Constitutional Court from ruling
on changes in the pension system and other budgetary issues.
ROMANIA VOTE
Romania's leu <EURRON=> dipped 0.05 percent and the currency
was expected to continue under pressure as the government's slim
majority put its ambitious reform agenda on a shaky footing.
However, the centrist government looks likely to survive a
no-confidence vote in parliament over deep spending cuts and tax
hikes, which are needed to maintain a 20 billion euro IMF-led
bailout. []
"(The government's) survival is already priced in so the leu
wouldn't go any further than 4.25-4.26," one Bucharest dealer
said. "Otherwise, it will go towards 4.35-4.4."
Dealers expect the central bank to intervene to stem any
weakening pressures from a government collapse, but the leu
could still flirt with all-time lows in such a scenario.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.633 24.646 +0.05% +6.84%
Polish zloty <EURPLN=> 3.949 3.933 -0.41% +3.93%
Hungarian forint <EURHUF=> 274.65 274.93 +0.1% -1.57%
Croatian kuna <EURHRK=> 7.338 7.34 +0.03% -0.39%
Romanian leu <EURRON=> 4.273 4.271 -0.05% -0.83%
Serbian dinar <EURRSD=> 107.07 106.93 -0.13% -10.45%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 80bps over bmk*
7-yr T-bond CZ7YT=RR +9 basis points to +83bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +103bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +371bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +345bps over bmk*
10-yr T-bond PL10YT=RR -6 basis points to +310bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1453 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marton Dunai and Jason Hovet; editing by
Stephen Nisbet, John Stonestreet)
