* Crown hits highest level since March 8
* Czech govt crisis closer to resolution
* Polish c.bank chief plays down May rate hike expectations
(Adds Czech politics, Polish cbank chief, updates prices)
By Sam Cage and Jana Mlcochova
BUCHAREST/PRAGUE, April 14 (Reuters) - The Czech crown led
emerging Europe's currencies on Thursday after ruling parties
moved to avert a government crisis, while the zloty gave up some
gains after Poland's top central banker played down expectations
of a quick rate hike.
The leaders of the three-party Czech governing coalition
said they would keep the centre-right grouping together despite
a corruption scandal that has threatened it with collapse.
[]
The pledge helped buoy the crown, which had already climbed
against the euro after breaking key technical levels.
"Some of the strengthening of the crown may be linked to the
progress in the government crisis," said Ivo Prokop, an FX
dealer at Raiffeisenbank.
"Expectations for the crown in the long term are that the
unit should continue to appreciate and now there is the positive
news that the political situation could improve."
The crown <EURCZK=> rose 0.43 percent against the euro to
24.24 by 1407 GMT, its strongest since March 8 after breaking
resistance at 24.350-24.370.
Dealers said the next key range was 24.200-24.350, a
resistance level around which the crown was trading in early
March.
The Czech Finance Ministry cut its 2011 forecasts for the
budget deficit, government debt, and growth on Thursday,
reflecting confidence in the cabinet's fiscal retrenchment.
[]
POLISH EXPECTATIONS
Poland's zloty shed some of its early gains after central
bank Governor Marek Belka played down prospects of a quick rate
hike following Wednesday's release of much higher than expected
March inflation data.
Belka said rate decisions by the bank were not driven solely
by the latest data, though it remained in a tightening phase.
[]
Poland has raised rates by half a percentage point to 4
percent in two moves this year and Wednesday's data boosted
expectations of some analysts that it would hike again in May
rather than pausing in tightening. []
The zloty <EURPLN=> rose 0.25 percent to 3.953 per euro by
1407 GMT. Bond yields were down by 1 basis point at the short
end of the curve.
Hungary's forint fell. Dealers said investors were building
long zloty positions against the forint, <PLNHUF=R> which
continued to retreat from 15-month highs hit against the Polish
currency last week.
Traders said Hungary's high external debt made its assets
more vulnerable than the zloty to renewed concerns over the euro
zone debt crisis centred on the risk of Greece being forced to
restructure its debt. []
Hungarian bond yields rose 9-11 basis points from Wednesday,
though staying within touching distance of multi-month lows hit
earlier this month.
"The forint has also weakened as the euro fell. The Greek
restructuring issue has surfaced again and now the market is in
a risk-off mode slightly," one Budapest-based fixed income
trader said.
Another currency trader said: "Of course the euro's
weakening played a role... But you can see that the zloty is
steady like a rock and zloty/forint positions are being built
again."
Romania's leu <EURRON=> traded 0.27 percent stronger at
4.097 per euro ahead of a tender for five-year debt at which
analysts expect good demand, with yields at about 7.32-7.40
percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.223 24.345 +0.5% +3.21%
Polish zloty <EURPLN=> 3.951 3.961 +0.25% +0.18%
Hungarian forint <EURHUF=> 266.6 266.9 +0.11% +4.27%
Croatian kuna <EURHRK=> 7.364 7.364 0% +0.22%
Romanian leu <EURRON=> 4.097 4.108 +0.27% +3.32%
Serbian dinar <EURRSD=> 101.23 101.12 -0.11% +4.64%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -3 basis points to -11bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +43bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +58bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +324bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +308bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +275bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +9 basis points to +446bps over bmk*
5-yr T-bond HU5YT=RR +18 basis points to +417bps over bmk*
10-yr T-bond HU10YT=RR +10 basis points to +372bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1624 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; editing by Stephen Nisbet, John
Stonestreet)
