* Fed bond buying programme sending cash to EM
* Zloty, forint to benefit most; CEE rates may not rise fast
* Warsaw stocks highest since Aug 2008
* Czech cbank due up later in day
(Adds stocks, Czech bonds, details)
By Jason Hovet
PRAGUE, Nov 4 (Reuters) - The Polish zloty rose half a
percent and Warsaw blue-chips hit a more than two-year high on
Thursday, leading emerging European gains after the U.S. Federal
Reserve opened the way for more money flows into global markets.
The Fed committed to buy $600 billion in bonds in a second
round of so-called quantitative easing (QE2) to support a
struggling U.S. economy on Wednesday despite worries it could do
more harm than good. []
The Fed move is seen driving flows more into emerging
markets as investors seek higher-yielding assets. Latin American
and Asian policymakers vowed on Thursday to use fresh measures
to curb capital inflows and protect currencies. []
Emerging European policymakers are not expected to follow
their lead as currencies still have not fully recovered from the
economic crisis that started two years ago, but QE2 will limit
scope for central banks that are close to hiking interest rates,
such as Poland and to some extent the Czech Republic.
The zloty <EURPLN=> rose 0.6 percent to bid at 3.902 by 0801
GMT, at a 2-1/2 week high. The Hungarian forint <EURHUF=> was
flat. The two are likely to benefit the most from the yield hunt
in emerging Europe.
The Czech crown <EURCZK=>, which has led central European
currency gains this year but has become stuck in a range the
last month, was steady. The Romanian leu <EURRON=> inched up.
"The criticism (about the budget outlook) from S&P may be
one reason why (the forint is) not firming as much," a
Budapest-based currency dealer said.
Standard & Poor's kept the country's outlook on negative on
Wednesday and warned of future budget risks. []
Budapest, like Bucharest, has struggled to convince
investors on fiscal tightening plans in recent months. This
concern has held back central European among other emerging
markets this year in terms of gains and investor flows.
LIMITED MONETARY SCOPE
On Thursday, Warsaw's blue-chip index <> rose 1.5
percent to its highest level since August 2008. Budapest stocks
<> gained a similar amount.
The zloty rose by around half a percent on Wednesday
following calls for a rate hike to cap inflationary pressures by
some Polish central bankers who had previously voted for stable
rates. Analysts have expected the bank to raise rates by the end
of the year. []
Bank BPH said QE2 and likely delay in European Central Bank
rate tightening will pressure the zloty and its central bank.
"If the scale of the appreciation will be excessive, this
could in turn harm the economic recovery. This is something that
the Monetary Policy Council (MPC) will have to take into
consideration," BPH said.
Polish policymakers left interest rates at a record low 3.5
percent last week, but did raise the reserve requirement rate.
Czech rate setters meet on Thursday, with analysts forecasting
no change in interest rates. []
Czech markets are pricing in stable rates the rest of the
year. Bond yields were mixed on Thursday, steepening the curve.
The yield spread between the 3- and 15-year bonds has widened to
166 basis points from 139 basis points since Sept 1.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.48 24.475 -0.02% +7.51%
Polish zloty <EURPLN=> 3.902 3.927 +0.64% +5.18%
Hungarian forint <EURHUF=> 272.2 272.21 0% -0.68%
Croatian kuna <EURHRK=> 7.344 7.34 -0.05% -0.47%
Romanian leu <EURRON=> 4.289 4.294 +0.12% -1.2%
Serbian dinar <EURRSD=> 107.27 107.6 +0.31% -10.62%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -11 basis points to 76bps over bmk*
7-yr T-bond CZ7YT=RR -10 basis points to +83bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +110bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1012 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Toby Chopra)
