* FX, stocks weaker as sentiment turns less favourable
* Romanian cbank holds rates at 8 pct amid govt crisis
* EU sees Hungary overshooting budget deficit targets
(adds EU, more detail, Hungary bonds)
By Krisztina Than
BUDAPEST, Nov 3 (Reuters) - East Europe's currencies eased
on Tuesday with the forint leading losses but the Romanian leu
held steady as the central bank unexpectedly kept key interest
rates unchanged at 8 percent.
The Romanian central bank took a cautious stance amid a
government crisis there and kept Romania's main rate at the
highest in the European Union.
The rate decision comes a day before a vote in Romania for
the proposed cabinet of Prime Minister designate Lucian
Croitoru, which is widely expected to fail getting approval.
This is expected to extend the government and budget
uncertainty until after the presidential election.
"It is a prudent decision (by the bank), they were more
prudent than expected, justified mainly by political turmoil,"
said Ionut Dumitru, analyst at Raiffeisen in Bucharest.
Currencies and stock markets across the region weakened on
Tuesday as sentiment turned less favourable for riskier assets
and financial stocks were hit on world markets.
"This year there has been a extremely high correlation
between the performance of financial stocks and the performance
of the CEE currencies -- so when financials underperform the
rest of the stock market the CEE currencies have tended to
weaken," said Lars Christensen, analyst at Danske Bank.
"This is a clear indication that the rebound in the CEE
currencies have been driven by liquidity rather than improved
fundamentals," he added.
The forint <EURHUF=> briefly plunged to near 289 versus the
euro in overnight trading which dealers said was likely due to a
mishit, which then triggered stop losses.
The currency opened around 278 but eased towards 280 and
dealers said the next support level was at 282.50.
The zloty <EURPLN=> hit a 3-month low overnight because of
the worsening investor sentiment.
Hungary's parliament will hold a key vote on the main
numbers of the 2010 budget later on Tuesday, which is widely
expected to pass [].
The European Commission said on Tuesday it expected Hungary
to overshoot its deficit targets, which some dealers said
contributed to the forint's weakening. []
The Commission released its bi-annual forecasts on Tuesday
which showed only Poland will escape recession [].
ROMANIA IN FOCUS
The zloty <EURPLN=> and Czech crown <EURCZK=> also slipped
with regional peers, while the region's stock markets were also
in negative territory, with Budapest <> down 2.6 percent and
Warsaw <> down 2.2 percent at 1105 GMT.
In the Czech Republic, the central bank will decide on rates
on Thursday and analysts expect them to stay on hold, although
some in the markets are expecting a cut.
But dealers said the crown will mostly take its cue for now
from regional and global factors.
Romania's approval of a 2010 budget by Dec. 10 is essential
for Bucharest to receive quickly a third tranche of aid from the
International Monetary Fund, a representative of the Fund told
Reuters on Monday. []
The largest opposition grouping, the Social Democrat Party,
reiterated on Tuesday they will vote against Croitoru.
"We don't need ... the Croitoru cabinet at this stage," it
said in a statement.
Hungarian bonds weakened along with the forint, with yields
rising by about 20 basis points traders said.
"Part of this weakening is only people trying to push up
yields ahead of Thursday's bond auctions <HUISSUE> but it's
difficult to predict now how demand for the auction will shape
up," a fixed income trader said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.417 26.343 -0.28% +1.27%
Polish zloty <EURPLN=> 4.308 4.267 -0.95% -4.48%
Hungarian forint <EURHUF=> 279.6 276.67 -1.05% -5.74%
Croatian kuna <EURHRK=> 7.247 7.242 -0.07% +1.63%
Romanian leu <EURRON=> 4.302 4.3 -0.05% -6.69%
Serbian dinar <EURRSD=> 93.54 93.59 +0.05% -4.34%
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +370bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +329bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +292bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +557bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +518bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +450bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1210 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Krisztina Than, editing by Mike Peacock)
