(Adds quote on crown, data table, updates prices)
By Dagmara Leszkowicz
WARSAW, Nov 6 (Reuters) - Hungary's forint led emerging
central Europe's currencies lower on Thursday as global risk
appetite slumped and investors awaited Czech and euro zone
interest rate decisions later in the day.
At 1122 GMT Hungary's forint <EURHUF=> shed 1.8 percent to
262.2 per euro, while Poland's zloty <EURPLN=> fell 1.6 percent
to 3.57. The Czech crown <EURCZK=> dropped 1.2 percent to 24.694
and Romania's leu <EURRON=> lost 0.8 percent to 3.71.
Serbia's dinar, the region's biggest loser in the last
month, also fell, underlining concerns that tightening credit
markets and a sharp slowdown in growth will eventually send more
in the region to the IMF for aid.
The central bank in the Czech Republic, which the EU has
said should weather the financial crisis well, is expected to
cut interest rates for a second time on Thursday, accompanied by
easing in the euro zone and by the Bank of England.
Czech rates currently stand 25 basis points below euro zone
rates and with the European Central Bank seen slashing rates by
50 bps on Thursday, many see a risk of a deeper Czech cut than
the quarter point forecast in a Reuters poll [].
The crown hit a one-week low ahead of the bank's verdict.
"London banks are expecting a bigger cut, so it could be a
selloff down (stronger) if the bank doesn't," said a Prague
currency trader.
Serbia's dinar <EURRSD> fell 1 percent to 86.487 per euro,
as banks remained reluctant to sell euros due to a lack of
external credit inflows.
"Liquidity is thin and spreads are widening making the dinar
declines even more drastic," one treasury analyst said.
Worries over Serbia's external financing have hit the
currency, which has shed 12.5 percent since Oct. 1, and the
country's government said earlier in the week it was in talks
for a stand-by deal with the International Monetary Fund
[].
Serbia's talks with the IMF followed a $25 billion IMF/EU
aid package for Hungary at the end of last month, which helped
calm investor nerves in the region and stabilised the forint.
Hungary's central bank and government said on Thursday it
would provide 600 billion forints ($2.95 billion) in funding to
the country's banks as part of the package [].
GROWTH OUTLOOK WORSENS
Global stocks continued to slide as the focus turned to
bleak economic outlooks after a rally leading up to the U.S.
election. Central European bourses slipped on Thursday, with
Hungary's BUX <> and Prague's PX <> down 5 percent.
Earlier on Thursday Austria's Raiffeisen International
<RIBH.VI>, emerging Europe's second-biggest bank, cut its 2008
net profit forecast and put mid-term goals under review as weak
economic development will likely hit growth [].
Central Europe's economies have started to feel the strain
of lower demand from their main trader partner, the euro zone.
Hungary's industrial output fell in September on lower exports,
data showed Thursday [], which followed a
narrower-than-expected Czech trade surplus on Wednesday.
Bond markets have also been hit by the recent poor global
sentiment that saw foreign funds selling in a hunt for cash,
with volatility still high and liquidity thin on Thursday.
"Today the market awaits the ECB and Bank of England
decision. This may impact domestic bond market," said Marcin
Ziolkowski, dealer at Millennium Bank in Warsaw.
Czech paper yields and money market rates lowered ahead of
the central bank's meeting, as investors bet on a
bigger-than-expected rate cut.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.694 24.404 -1.19% +6.8%
Polish zloty <EURPLN=> 3.570 3.514 -1.59% +0.85%
Hungarian forint <EURHUF=> 262.180 257.45 -1.84% -3.69%
Croatian kuna <EURHRK=> 7.147 7.136 -0.15% +2.45%
Romanian leu <EURRON=> 3.711 3.683 -0.76% -3.65%
Serbian dinar <EURRSD=> 86.487 85.627 -1% -9.81%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -4 basis points to 166bps over bmk*
5-yr T-bond CZ5YT=RR -11 basis points to +146bps over bmk*
10-yr T-bond CZ9YT=RR -10 basis points to +106bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -29 basis points to +411bps over bmk*
5-yr T-bond PL5YT=RR -17 basis points to +349bps over bmk*
10-yr T-bond PL10YT=RR -9 basis points to +272bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -65 basis points to +946bps over bmk*
5-yr T-bond HU5YT=RR -78 basis points to +861bps over bmk*
10-yr T-bond HU10YT=RR -70 basis points to +539bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1222 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 Patrick Graham)
