* FX ends two-day rally
* Mood sours as effects of Warsaw's EU fund sales fades
* Currencies up from intra-day lows on World Bank report
(Adds details, quotes)
By Marius Zaharia
BUCHAREST, Feb 20 (Reuters) - Central European currencies
saw renewed declines on Friday as a global retreat from risk and
the bearish mood towards the region and its banks continued to
hit markets.
Bearish U.S data on Thursday, particularly signs of rising
joblessness, led to losses on Asian shares and currencies
overnight, prompting European shares and emerging markets to
open lower.
"The market is really playing the risk factor, along with
bad U.S. data (yesterday)," said a Prague trader, adding low
liquidity was widening moves.
Eastern European currencies moved off intra-day lows, helped
by a World Bank report that saw the possbility of growth in the
Czech Republic, Poland, Bulgaria, Romania, Slovakia and
Slovenia. []
"These comments could strengthen our currency," one
Warsaw-based dealer said.
The zloty was up a touch on the day at 4.72 per euro, the
Czech crown <EURCZK=> was steady at 28.8, while Hungary's forint
<EURHUF=> slid 0.7 percent and the Romanian leu <EURRON=> lost
0.3 percent by 1130 GMT. The World Bank expects a recession in
Hungary this year.
Concerns over external financing and banks' health have
pounded the region this week, sparked by warnings from ratings
agencies about the sector, but currencies rallied on Wednesday
and Thursday from record lows as policymakers moved to action.
Sentiment also improved on Friday when a Moody's analyst
said Austria's triple-A debt rating is not under pressure from
its banks' exposure to emerging Europe. []
Analysts have also noted talk of possible EU-wide support
for east Europe. On Friday Germany's foreign minister said a
process had begun to consider how economically strong euro zone
countries could help other states. []
"The comments from numerous international agencies as well
the European Commission, it does hopefully look like we are
slowly approaching some sort of EU-wide action," Cheuvreux said.
On Thursday, the Czech prime minister said he feared his
country may need foreign assistance because it was considered to
be in the same group as other countries worse affected by the
financial crisis. []
ZLOTY IN FOCUS
The recent rally was triggered by officials in Poland, Czech
Republic and Hungary talking up the currencies, while the Polish
finance ministry converted EU funds on the currency market on
Wednesday to prop up the zloty.
But as sentiment turned sour globally, hopes of Polish funds
have faded on Friday.
"The EU funds story is not helping because this money is not
as substantial as one would think and we don't know how much
governments will actually exchange on the market," said Bartosz
Pawlowski of TD Securities in London.
The zloty has been the most volatile currency in the region
this week as its FX market has more depth than its peers.
"Investors have been using the zloty as a proxy for the rest
of the region because it's much easier to take a position on
this market than, say, in Hungary or Romania," Pawlowski said.
Poland's biggest bank Pekao <BAPE.WA> reported on Friday it
made higher-than-expected provisions for bad debts in the fourth
quarter as it posted a 9 percent drop in earnings, sending its
shares lower and pressuring the currency as well.
Poland has also been hurt by losses for companies who bet on
the zloty when it was at record highs in the summer.
The region has been hammered by recession fears, as growth
outlooks deteriorated sharply, forcing central banks into an
easing monetary cycle.
But a crisis of confidence in eastern Europe looks likely to
make the region's central banks slow down or halt cuts in
interest rates, despite mounting concerns over economic growth.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.81 28.83 +0.07% -7.14%
Polish zloty <EURPLN=> 4.722 4.732 +0.21% -12.85%
Hungarian forint <EURHUF=> 303.85 301.89 -0.65% -13.26%
Croatian kuna <EURHRK=> 7.47 7.47 0% -1.41%
Romanian leu <EURRON=> 4.277 4.265 -0.28% -6.14%
Serbian dinar <EURRSD=> 94.83 94.737 -0.1% -5.64%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +17 basis points to 207bps over bmk*
4-yr T-bond CZ4YT=RR +4 basis points to +235bps over bmk*
8-yr T-bond CZ8YT=RR -11 basis points to +302bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +18 basis points to +456bps over bmk*
5-yr T-bond PL5YT=RR +17 basis points to +384bps over bmk*
10-yr T-bond PL10YT=RR +20 basis points to +322bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +1181bps over bmk*
5-yr T-bond HU5YT=RR +19 basis points to +1045bps over bmk*
10-yr T-bond HU10YT=RR +15 basis points to +892bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1231 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 Reuters bureaus, writing by Marius Zaharia;
Editing by Ian Jones)
