* Zloty gains as Komorowski elected president
* Leu firms after IMF grants funds to Romania
* Romania sells less debt than planned
* Hungary budget deficit exceeds 2010 target in H1
(Adds Romania debt sale, updated moves, Hungary deficit)
By Gergely Szakacs and Sam Cage
BUDAPEST/BUCHAREST, July 5 (Reuters) - Central European
currencies rose on Monday, boosted by Polish presidential
elections raising expectations of more reforms and an IMF
decision to release funds for recession-hit Romania.
Moderate conservative Bronislaw Komorowski narrowly won
Poland's presidency, setting the stage for a political alliance
with Prime Minister Donald Tusk that will be expected to deliver
promised economic reforms. []
The International Monetary approved a $1.115 billion
disbursement to Romania after it cut salaries and hiked value
added tax, which helped the leu <EURRON=> rise 0.9 percent.
[]
At 1348 GMT, the zloty <EURPLN=> was 1 percent stronger
versus the euro, bringing it close to erasing its losses for the
year so far and lifting currencies across the region.
The Czech crown <EURCZK=> rose 0.6 percent and Hungary's
forint <EURHUF=> was flat.
Uncertainty over budget policy has weighed heavily on the
financial markets of Romania and Hungary -- states which have
been aided by the IMF and the EU -- in the past two months.
Romania sold fewer six-month treasury bills than planned on
Monday and at higher yields than in a previous auction,
indicating it may continue to have problems financing its fiscal
deficit. []
Hungary's budget deficit rose to "nearly 120 percent" of the
full-year 2010 target in the first six months of the year,
Economy Minister Gyorgy Matolcsy told parliament. His ministry
will issue detailed Jan-June budget data <HUDEF=ECI> at 1500
GMT. []
That pressured Hungarian bonds, which gave up gains posted
early in the session and yields inched back towards their Friday
closing levels, a dealer said.
Czech markets are closed on Monday and Tuesday due to public
holidays.
POLISH HOPES
Because Komorowski is a member of the prime minister's
ruling Civic Platform (PO), the government no longer has to
worry about the risk of presidential vetoes of its legislation
and should be freer to pursue economic reforms. []
Polish bonds firmed slightly, driven by the zloty's gains.
"Expectations will be that the government will now crack the
whip on fiscal/structural reforms, which had proven difficult
under the cohabitation between the outgoing Justice and Law
(PiS) presidency and the PO-led government," analyst Timothy Ash
at RBS said in a note.
Dealers said news of the $1.115 billion IMF disbursement to
Romania boosted the leu and helped drive regional gains.
"The release of IMF/EC funding will have significantly
improved the government's cash position, easing concern over its
liquidity position," said RBS's Ash.
"It will also have opened the way for the (finance ministry)
to seek additional market funding over the next few weeks."
But the fresh payment may also fuel higher prices. It is
being part-funded by a VAT hike, which an IMF official was
quoted as saying had prompted the Fund to raise its 2010
inflation forecast to 7.9 percent from 3.5 percent.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.539 25.69 +0.59% +3.05%
Polish zloty <EURPLN=> 4.112 4.152 +0.97% -0.19%
Hungarian forint <EURHUF=> 285.71 285.5 -0.07% -5.38%
Croatian kuna <EURHRK=> 7.191 7.196 +0.07% +1.64%
Romanian leu <EURRON=> 4.25 4.289 +0.92% -0.3%
Serbian dinar <EURRSD=> 104.02 104.18 +0.15% -7.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 118bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +143bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +148bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +414bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +382bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +334bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +618bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +588bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +501bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1548 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Additional reporting by Sandor Peto in Budapest and Reuters
bureaus)
