* Zloty up on agreement with Eureko
* Leu under pressure after govt split
* Czech markets start pricing in rate cut
(Recasts with Eureko agreement, adds Czech minutes)
By Dagmara Leszkowicz
WARSAW, Oct 2 (Reuters) - The Polish zloty cut losses on
Friday and lifted other central European currencies after the
country's government signed a deal with Dutch company Eureko,
agreeing on a lower dividend than markets feared.
Under the deal, Poland will regain full control of the
region's biggest insurer, PZU, which will pay a special dividend
of 12.75 billion zlotys ($4.33 billion).[]
The Polish zloty <EURPLN=> jumped on the news, turning
positive on the day to bid at 4.255 to the euro, up 0.3 percent
from Thursday's local close after bidding down 0.5 percent
earlier.
"It appears a clear 'sell (EUR) on the news' case," Mateusz
Szczurek, chief economist said in an instant note after the
agreement.
Worries over a large dividend flooding markets have hung on
the zloty in the past few weeks, and dealers said the currency
could gain again after losing around 2 percent in September.
"I think the zloty may even gain further as this deal is
already in prices," said Przemyslaw Winiarczyk, dealer at
Millennium bank in Warsaw.
Elsewhere, other currencies cut back losses, with Hungary's
forint <EURHUF=> and the Czech crown <EURCZK=> edging up around
0.1 percent.
However, dealers said the crown may test the 25.500 per euro
level, which it hasn't breached since mid-September, in coming
sessions after central bank minutes raised chances of another
interest rate cut this year.
Central bank chief Zdenek Tuma was outvoted by the board at
last week's decision to leave rates flat last week instead of
lowering them, minutes from the meeting showed. []
Interbank interest rates dropped as much as 8 basis points
after the minutes were released, with 2-year interest rate swaps
<CZKAM6PR2Y=> quoted at 2.45 percent, down from 2.50 as markets
started re-pricing in rate cuts.
"This is quite a surprise for many guys that Tuma and Singer
were the most doveish on the board, said on Prague-base dealer.
"This could indicate that we could see a 25 basis point cut at
the November meeting."
DAY TWO
In Romania the leu was still under pressure after the
governing coalition split on Thursday, putting the country's
International Monetary Fund (IMF) aid at risk.
The IMF said it still expects the minority cabinet of Prime
Minister Emil Boc to stick to economic policies agreed in its
20-billion-euro aid package. []
Romania's Social Democrats quit the coalition government on
Thursday in protest at the sacking of a minister before
November's presidential election. [] []
"It's easing because of the government split, which triggers
uncertainty over implementation of fiscal reforms and Romania's
ability to meet its IMF deal requirements," said one dealer with
a foreign bank.
The leu <EURRON=> was 0.1 percent weaker to the euro, bid at
4.274. Dealers said the Romanian unit's declines might be capped
by possible central bank intervention.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.393 25.416 +0.09% +5.36%
Polish zloty <EURPLN=> 4.255 4.269 +0.33% -3.29%
Hungarian forint <EURHUF=> 270.9 271.03 +0.05% -2.71%
Croatian kuna <EURHRK=> 7.257 7.26 +0.04% +1.49%
Romanian leu <EURRON=> 4.274 4.27 -0.09% -6.07%
Serbian dinar <EURRSD=> 93.05 92.93 -0.13% -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +1 basis points to 168bps over bmk*
7-yr T-bond CZ7YT=RR -19 basis points to +185bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +178bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +392bps over bmk*
5-yr T-bond PL5YT=RR +6 basis points to +345bps over bmk*
10-yr T-bond PL10YT=RR +9 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +18 basis points to +567bps over bmk*
5-yr T-bond HU5YT=RR +12 basis points to +531bps over bmk*
10-yr T-bond HU10YT=RR +12 basis points to +480bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1131 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; Writing by Dagmara Leszkowicz;
Editing by Victoria Main)
