* Forint, zloty, stocks weaker as sentiment worsens
* Romanian cbank holds rates at 8 pct amid govt crisis
* Czech crown firms ahead of cbank meeting
(Adds fresh prices, comments.)
By Krisztina Than and Sandor Peto
BUDAPEST, Nov 3 (Reuters) - Hungary's forint and the Polish
zloty extended recent losses on Tuesday, while Romania's leu
held steady as its central bank surprised by keeping its 8
percent key interest rate on hold.
The Czech crown, an underperformer in Central Europe in the
past six weeks, firmed ahead of Thursday's central bank meeting
where interest rates are seen remaining unchanged at 1.25
percent.
The region's currencies have been under pressure since last
week as appetite for risk weakened in global markets, also
hitting equities in the world and the region.
But a Reuters poll of analysts showed the units would return
to the past few months' firming trend by 2010 and post solid
gains in the next 12 months, led by the zloty.[]
On Tuesday the forint <EURHUF=> and the zloty<EURPLN=>
recovered some ground after deep losses in overnight overseas
trade, but they stayed in the red relative to Monday's close.
The forint shed 0.4 percent versus the euro to 277.75 by
1506 GMT and the zloty eased 0.1 percent to 4.273, while stock
markets in the region<><><> extended the past
week's loss, shedding around two percent.
The European Commission's new forecasts confirmed on Tuesday
that concerns linger about fiscal and state debt performance in
the region.
It said that it expected Hungary to overshoot deficit goals
-- which some dealers said contributed to early weakness for the
forint -- and that it expected Poland's public debt to grow from
51.7 percent of GDP in 2009 to 57 percent in 2010.[]
Hungarian Finance Minister Peter Oszko said deficit targets
for this year and next remained achievable as the Commission's
forecasts for an overshoot were based on incomplete information.
Poland's central bank is expected to launch interest rate
hikes next year, while the Hungarian bank (NBH) is seen cutting
rates further, leaving the forint with less of a cushion to
other emerging currencies.
Oszko said the forint's weakening was not worrisome and did
not pose a threat to financial stability.[]
But government bond yields rose by around 15 basis points
and some dealers said the forint's fall may prompt a halt in the
NBH's interest rate cuts and may cut demand at upcoming bond
auctions on Thursday.<HUISSUE>
"The 280 forint rate (per euro), tested today, is a
psychological level," one dealer said. "I still feel that the
range for the next days will be 275-280."
ROMANIA KEEPS RATES ON HOLD
Danske Bank analyst Lars Christensen said in a note that the
region's currencies remained tightly correlated with the
performance of financial stocks, and technical factors and the
past erosion of carry pointed towards further weakening.
But domestic factors are also at play. The leu got
unexpected support from the central bank's decision to keep its
key rate unchanged at 8 percent, the highest in the European
Union.
The bank took a cautious stance amid a government crisis, a
day before a vote in Romania on the proposed cabinet of Prime
Minister designate Lucian Croitoru that is widely expected to
fail.
This is expected to extend government and budget uncertainty
until after an upcoming 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.
The Czech central bank is also expected to keep rates on
hold on Thursday, though some analysts have not ruled out one
more rate cut in a poll last week.[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.19 26.343 +0.58% +2.15%
Polish zloty <EURPLN= > 4.273 4.267 -0.14% -3.7%
Hungarian forint <EURHUF= 277.75 276.67 -0.39% -5.11%
Croatian kuna <EURHRK=> 7.246 7.242 -0.06% +1.64%
Romanian leu <EURRON=> 4.296 4.3 +0.09% -6.55%
Serbian dinar <EURRSD=> 94.22 93.59 -0.67% -5.03%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to 93bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +105bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +100bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +367bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +328bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +1 basis points to +559bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +505bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +445bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1606 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Krisztina Than and Sandor Peto, editing by
Mike Peacock)
