(adds background, quotes, fixed income)
By Marius Zaharia
BUCHAREST, Jan 16 (Reuters) - Central European currencies
firmed early on Friday, helped by risk aversion easing overnight
on renewed optimism about a fresh stimulus package in the U.S.
and the bailout of Bank of America Corp.
Bank of America Corp <BAC.N> was rescued by the U.S.
government on Friday through a $20 billion bailout and other
guarantees [].
Meanwhile, the U.S. Senate rejected a bid to block the
release of the second half of the $700 billion bailout programme
[] and Democratic leaders in the House of
Representatives unveiled a $825 billion tax cut and spending
bills they hope will help reverse the economic slump.
All these triggered a revival in investors' sentiment
towards high-yielding currencies and emerging markets.
The Polish zloty <EURPLN=> lead gains in the region, adding
1.4 percent by 0944 GMT, while the Czech crown <EURCZK=> and the
Hungarian forint <EURHUF=> firmed around 1 percent.
"The risk appetite has returned which is visible in yen
weakness and the strength in the euro against the dollar," said
Rafal Uss, a currency dealer at Raiffeisen Bank in Warsaw.
"Higher risk appetite means more willingness to invest in
emerging markets' currencies, including zloty," he added.
The Romanian leu <EURRON=> firmed 0.7 percent and dealers
said the currency was moving freely after two days of covert
central bank intervention to prop up the battered currency.
"The leu is moving on its own legs," one Bucharest-based
dealer said. "News in the U.S. are helping the region, I expect
firming until bad news triggers risk aversion again."
RATE CUT PRESSURES
Currencies have been hit this week on the back of a fresh
round of data showing a deeper slowdown in the region's
economies, along with falling inflation that widens the scope
for interest rate cuts. []
A softer euro on Thursday, after the ECB rate cut to a
historic 2 percent and an ongoing gas row between Ukraine and
Russia also added pressures.
Hungary's central bank is seen cutting rates by 50 basis
points on Monday, adding to a total of 150 basis point easing
over the last months, as inflation falls and the economy is
shrinking more than expected [].
Several Czech policy makers, including vice-governor Mojmir
Hampl on Friday [], said the central bank's
alternative, pessimistic scenario, showing 2009 growth at 0.5
percent, is becoming more probable.
The Czech central bank has cut 150 basis points from its
base rate to 2.25 percent since August, and many analysts expect
at least another 50 basis point reduction in February, bringing
rates to match a historic low.
"I think the market can imagine a 75 point basis cut
February," a Prague bond dealer said.
Romania is also seen joining the rate-cutting trend next
month with 25-50 basis points, while Poland is seen slashing
another 50 basis points off its key rate this month.
"The market continues to bet on quick and aggressive
interest rate cuts in Poland," a dealer at the Warsaw bank said.
He added the monetary outlook gave support for bond prices on
the short-end of the curve.
Hungarian bonds strengthened, tracking forint gains.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.032 27.301 +1% -1.03%
Polish zloty <EURPLN=> 4.149 4.208 +1.42% -0.82%
Hungarian forint <EURHUF=> 276.29 279.25 +1.07% -4.61%
Croatian kuna <EURHRK=> 7.385 7.36 -0.34% -0.27%
Romanian leu <EURRON=> 4.259 4.29 +0.73% -5.74%
Serbian dinar <EURRSD=> 92.841 93.33 +0.53% -3.62%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 121bps over bmk*
4-yr T-bond CZ4YT=RR -4 basis points to +116bps over bmk*
8-yr T-bond CZ8YT=RR +6 basis points to +117bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +320bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +268bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +237bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +14 basis points to +779bps over bmk*
5-yr T-bond HU5YT=RR +13 basis points to +748bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +591bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1144 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 Andy Bruce)
