(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Dec 9 (Reuters) - The Romanian leu fell to a
one-month low on Tuesday due to uncertainty over the country's
next governing coalition, while Poland's zloty weakened below
its key level of 3.90 to the euro.
Coalition talks are continuing in Romania, with the leftist
Social Democrats and centrist Democrat-Liberals moving closer to
forming a government, a prospect greeted with some trepidation
by the market. []
At 0930 GMT, the Romanian currency <EURRON=> was down 0.4
percent against the euro, trading at 3.884.
"The leu is falling on commercial orders, not to mention the
fact that the Social Democrats are not seen positively by the
markets," one dealer said.
Other emerging European currencies were moving around their
closing levels, with the Czech crown (ERUCZK=> slightly above
its previous close and Hungary's forint <EURHUF=> holding steady
at 0.2 percent down against the euro.
"For the time being, the forint seems to have taken the
surprise interest rate cut favourably and the external
environment is also supportive," a Budapest-based currency
dealer said.
"The Dow is at a two-week high, so sentiment is better,
although players seem to have started out a bit more carefully
this morning."
On Monday rating agency Moody's downgraded its outlook for
the Czech Republic to stable from positive [] but
analysts said it had had a limited impact on the currency.
"It is funny. For this reason and many others, the crown
should be under pressure, (weaker than) 26.00 (versus the euro)
but it is not," a Prague-based dealer said.
He said the unit was driven by positive sentiment on global
markets as risk aversion eases and investors return to equities.
BONDS MOSTLY FLAT
Trade in the bonds market was thin on Tuesday, but in
Hungary dealers said they expected yields to slide further as
markets are pricing in further rate cuts.
Hungary's central bank unexpectedly cut its benchmark base
rate by 50 basis points to 10.5 percent on Monday at an
unscheduled rate meeting.
"We could slide further in the coming days as everybody
expects more rate cuts. The central bank gave these expectations
a good push yesterday. And there's plenty of room for yields to
fall," a dealer said.
"There's not a whole lot of trade, there are no offers.
Everybody's hanging on to their papers."
Despite improving sentiment on global and local markets, the
Polish zloty <EURPLN=> weakened beyond the key technical level
of 3.90 against the euro, and analysts said the currency is
definitely on a depreciating trend.
"The zloty is weakening and it will probably go to 4.00 to
the euro," said Ernest Pytlarczyk, head of financial markets
research at BRE bank in Warsaw.
"Since there are no signs that the American economy is
recovering, the currency has no support for gains."
The declines in the Polish currency come despite
expectations of relatively robust economic growth in 2009.
Polish central bank governor Slawomir Skrzypek said on
Tuesday GDP growth may come in above 3 percent, higher than
previously thought [] and well ahead of most other
European economies.
Some analysts say the currency is suffering from fears that
some local exporters will now scramble to buy euros to settle
losses on hedging contracts taken to protect their earnings when
the currency was surging earlier in the year.
"The market is waiting for the financial watchdog report due
around mid-December that is likely to show the scale of the
problem and it seems the zloty is weakening on this issue," said
Jan Koprowski, dealer at BNP Paribas in Warsaw.
--------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.72 25.74 +0.08% +2.93%
Polish zloty <EURPLN=> 3.933 3.908 -0.64% -9.23%
Hungarian forint <EURHUF=> 263.86 263.35 -0.19% -4.35%
Croatian kuna <EURHRK=> 7.183 7.19 +0.1% +1.96%
Romanian leu <EURRON=> 3.884 3.869 -0.39% -8.49%
Serbian dinar <EURRSD=> 82.945 84.034 +1.3% -5.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +14 basis points to 160bps over bmk*
5-yr T-bond CZ5YT=RR +13 basis points to +153bps over bmk*
10-yr T-bond CZ9YT=RR +7 basis points to +120bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +328bps over bmk*
5-yr T-bond PL5YT=RR -17 basis points to +272bps over bmk*
10-yr T-bond PL10YT=RR -12 basis points to +251bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -44 basis points to +753bps over bmk*
5-yr T-bond HU5YT=RR -58 basis points to +704bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +544bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0930 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Andy Bruce)
