* Most currencies weaken, leu remains steady
* Hungary opposition backs PM nominee
* Czechs agree early elections
* Risk aversion picks up on U.S. auto news
(adds quotes, background, fixed income)
By Marius Zaharia
BUCHAREST, March 30 (Reuters) - Most central European
currencies fell on Monday, as political worries persisted in the
region and investors dropped risky assets globally, while the
Romanian leu held on to last week's IMF-related gains.
Currencies have been damaged last week by the fall of
government leaders in Hungary and the Czech Republic, but found
some relief in IMF-led financial aid agreements for Romania and
Serbia, and a global stocks rally.
"We continue to expect political newsflow to act as a drag
on regional markets in the near term," UniCredit analysts said
in a research note. "From a longer-term perspective we see
growth as being the key market driver, both to the extent that
it impacts macro vulnerabilities and impacts politics."
A rapid worsening of economies across the region has put
pressure on governments and raised worries that social unrest
will force them into lax fiscal policies.
By 1024 GMT, the Polish zloty <EURPLN=> fell 1.4 percent
from Friday's domestic close, leading regional losses.
The forint <EURHUF=> lost 0.9 percent, the Czech crown
<EURCZK=> dropped 0.5 percent, while the leu <EURRON=> held on
to last week's gains, kept firmer by Romania's 20 billion euro
aid deal, and before a central bank meeting on Tuesday.
In Hungary, the opposition Free Democrats have endorsed
Gordon Bajnai, the ruling Socialists' nominee to replace Prime
Minister Ferenc Gyurcsany, in a move which may end a week-long
political deadlock. []
Dealers said markets do not yet believe that Bajnai would be
able to impose swift reforms, although he has promised quick and
painful measures to mitigate the impact of the crisis
[].
"The forint's weakening is caused by domestic factors, the
political uncertainty," one dealer said. "The concern is that
(Bajnai) will not be a long-term solution."
Hungary has been one of the hardest hit central European
economies in the global slowdown, with falling demand for
exports from a recession-stricken euro zone punishing economies
that had grown swiftly on foreign credit and investment.
In the Czech Republic, leaders of the two biggest political
parties agreed over the weekend that an early election should be
held, but the timing was still uncertain along with what
government would lead the country in the meantime. []
Despite political nerves, the crown has outperformed its
regional peers over the past few sessions, as dealers noted
Prague's markets were driven mainly by external factors.
Investors' aversion to risk heightened after a U.S.
taskforce rejected recovery plans from General Motors and
Chrysler. []
"The carmakers' story has hit things globally and stocks are
under pressure again," one Prague trader said.
In fixed income markets, Poland was waiting for a finance
ministry release on its debt supply late on Monday or on
Tuesday, while yields rose because of currency weakness.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.427 27.298 -0.47% -2.46%
Polish zloty <EURPLN=> 4.709 4.643 -1.4% -12.61%
Hungarian forint <EURHUF=> 307.25 304.35 -0.94% -14.22%
Croatian kuna <EURHRK=> 7.48 7.456 -0.32% -1.54%
Romanian leu <EURRON=> 4.238 4.243 +0.12% -5.28%
Serbian dinar <EURRSD=> 94.418 94.537 +0.13% -5.23%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +29 basis points to 240bps over bmk*
4-yr T-bond CZ4YT=RR +51 basis points to +255bps over bmk*
8-yr T-bond CZ8YT=RR +8 basis points to +327bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +12 basis points to +435bps over bmk*
5-yr T-bond PL5YT=RR +14 basis points to +381bps over bmk*
10-yr T-bond PL10YT=RR +13 basis points to +325bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +10 basis points to +1098bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +1025bps over bmk*
10-yr T-bond HU10YT=RR +11 basis points to +886bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1224 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index [].
(Reporting by Reuters bureaus, Writing by Marius Zaharia,
Editing by David Stamp)
