* FX mostly rebound, Polish GDP a positive surprise
* Hungarian bonds weak after Monday rate hike
* Hungary 3-month bill yields jump 50 bps at auction
* Czech crown tests key 25 level
* Euro zone debt crisis key factor for markets
(Updates throughout)
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, Nov 30 (Reuters) - The zloty rebounded more
than one percent on Tuesday after strong economic growth last
quarter boosted rate hike expectations, while emerging Europe
consolidated some after Monday's sharp falls.
The euro zone debt crisis kept sentiment fragile in the
region and currencies struggled to stay on the firmer side of
key technical levels, traders said.
Hungary's surprise interest rate hike on Monday dampened
demand at Tuesday's auction of 3-month debt, which fell short of
target driving yields higher. Bond yields generally held near
15-month highs, with a conflict between the central bank and the
government also weighing on Hungarian markets.
Poland's economy grew by 4.2 percent in annual terms in the
third quarter, data showed on Tuesday, more than analysts' 3.6
percent forecast. Poland is expected to outpace European
economic growth this year and next after being the only EU state
to avoid recession last year.
The zloty <EURPLN=> rose after the figures and bid up 1.5
percent on the day at 4.035 to the euro by 1534 GMT, winning
back nearly all the losses that took it to a 4-month low in the
previous session.
Raiffeisen said third-quarter GDP data bode well for the
zloty, but that it would be cancelled out in the short-term by
spreading market volatility from the euro zone debt crisis.
"We see the Polish currency as cheap at the current level,"
it said in a weekly report.
"Nevertheless, over the short run the biggest risk and
negative factor continues to be the debt crisis in the Eurozone.
Despite the significant economic acceleration in Poland, we
still cannot rule out higher EUR/PLN levels in the immediate
future, due to the uncertain situation."
The zloty -- investors' favourite Central European currency
in recent months due to strong Polish growth -- rebounded after
breaching technical levels at 4.0 and 4.1 in the past week.
A zloty exchange rate around or below those levels would
make it easier for the Polish government to hold debt -- where
about a quarter is in foreign currency -- from breaching levels
that would trigger mandatory spending cuts. []
Central bank governor Marek Belka said the currency's
fluctuations were "not dramatic" and that it would return to its
rising trend after global market turbulence over Ireland's
fiscal woes ends. []
Prime Minister Donald Tusk made similar comments but
conceded volatility may continue in the winter months.
[]
WEAKNESS SEEN
Hungary's forint <EURHUF=> -- the other big loser with a 2
percent drop in the past week -- firmed 0.8 percent to 281.5 per
euro in volatile trade that saw an earlier drop halt at the 285
technical level.
Romania's leu <EURRON=> firmed 0.2 percent to 4.293.
The Czech crown <EURCZK=>, often seen as a safe haven in the
region, lost 0.4 percent due to the unwinding of regional cross
trades involving the zloty. In late afternoon trade it tested
the 24.99 technical levels that would leave it vulnerable to a
break above the psychological 25 per euro level.
Hungary cut a 3-month Treasury bill sale to 30 billion
forints from 40 billion forints offered a day after the central
bank (NBH) surprised on Monday by increasing its base rate by 25
basis points from a record low of 5.25 percent.
It was the first central bank in the region since the 2008
global crisis to increase interest rates, going against
analysts' expectations of Poland being the first to hike rates
sometime by the end of the first quarter. []
Even though it indicated that further tightening may come, a
report that the government may press for a rise in the bank's
inflation target -- adding to plans to replace the majority of
rate setters next year -- added to concerns over Hungary's
policy path.
"Based on that, a weakening forint trend is on the cards,"
one Budapest-based currency dealer said.
"In the first round, 285 looks a technical support, then
288-290 from which the forint rebounded several times in the
past two years, while a move through 290 would be a significant
technical breakthrough," the dealer added.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.923 24.819 -0.42% +5.6%
Polish zloty <EURPLN=> 4.035 4.096 +1.51% +1.71%
Hungarian forint <EURHUF=> 281.5 283.68 +0.77% -3.96%
Croatian kuna <EURHRK=> 7.423 7.43 +0.09% -1.53%
Romanian leu <EURRON=> 4.293 4.301 +0.19% -1.3%
Serbian dinar <EURRSD=> 107.13 107.09 -0.04% -10.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +4 basis points to 92bps over bmk*
7-yr T-bond CZ7YT=RR +8 basis points to +82bps over bmk*
10-yr T-bond CZ9YT=RR +7 basis points to +104bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +382bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +374bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +342bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +21 basis points to +705bps over bmk*
5-yr T-bond HU5YT=RR +16 basis points to +666bps over bmk*
10-yr T-bond HU10YT=RR +15 basis points to +573bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1636 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 []
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(Reporting by Reuters bureaux, writing by Marton Dunai and
Sandor Peto; editing by Patrick Graham and Catherine Evans)
