* FX flat after rally, awaiting key data in U.S
* Leu holds on to this week's 1.5 pct gains ahead of vote
(adds detail, quotes, Polish bonds)
By Marius Zaharia
BUCHAREST, Dec 4 (Reuters) - The leu hovered near a
two-month high on Friday ahead of a presidential run-off vote at
the weekend, as central European currencies took a breather
after a recent rally ahead of U.S data later in the day.
Romania's leftist leader Mircea Geoana holds a wide lead in
opinion polls and he is expected to unseat President Traian
Basescu and appoint a government of his own ex-communist party
and their Liberal allies before Christmas. []
Analysts say his victory will likely end a political crisis
but uncertainty over whether the new government will tighten the
fiscal belt will limit gains for the leu. []
At 1028 GMT, the Polish zloty <EURPLN=> and the Hungarian
forint <EURHUF=> were 0.1-0.3 percent stronger from Thursday's
close, while the Czech crown <EURCZK=> was 0.3 percent down and
the leu <EURRON=> was an inch weaker.
"The region is flat this morning and I expect trade to be
quiet until the U.S. non-farm payrolls data," one dealer in
Bucharest said.
Data in the world's biggest economies are often setting the
scale of risk appetite, moving emerging markets.
In Czech Republic, data showed real wages rose at the
fastest pace in eight quarters at 4.7 percent in July through
September, but there was no immediate impact on markets.
[]
In Poland, 10-year bonds inched down on Friday ahead of
Wednesday road bonds tender when state-owned BGK bank offers up
to 1.8 billion zlotys in 9-year IDS1018 road bonds.
"Longer-end of the curve is slightly weaker as investors are
leaving space in their portfolios for the road bonds," said
chief dealer at Pekao bank in Warsaw Maciej Slomka.
Other debt markets in the region were quiet.
Regional currencies also got a boost this week from Turkey's
rating upgrade by Fitch to 'BB+' from 'BB-' and from ECB head
Jean-Claude Trichet comments praising Poland's economic
resilience during the global crisis [].
LEU PUZZLE
The leu has gradually gained some 1.5 percent this week,
with dealers suspecting covert central bank interventions to
reduce leu liquidity after the finance ministry sold
euro-denominated paper worth 1.4 billion euros on the domestic
market last week [].
Leu's gains have been broadly in line with its peers this
week, after having been mostly disconnected from regional moves
for most of this year, with dealers saying some investors are
turning their eyes on Romania again as political risk subsides.
The unit has been trading in a narrow range around 4.2-4.3
per euro for most of this year, with dealers saying frequent
central bank covert interventions have offset political and
fiscal woes. The bank has repeatedly declined any comment.
"The market action clearly suggests that investors are
positioned for a positive outcome, i.e. quick government
formation and the distribution of the next IMF tranche,"
UniCredit said in a note.
However, markets still worry over Geoana's reluctance to
back painful spending cuts needed to unblock a deal with the
International Monetary Fund, meaning a potential post-election
relief rally will not push the leu far beyond 4.2 per euro.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.841 25.776 -0.25% +3.53%
Polish zloty <EURPLN=> 4.095 4.098 +0.07% +0.49%
Hungarian forint <EURHUF=> 269.35 270.01 +0.25% -2.15%
Croatian kuna <EURHRK=> 7.302 7.311 +0.12% +0.86%
Romanian leu <EURRON=> 4.208 4.205 -0.07% -4.6%
Serbian dinar <EURRSD=> 96.502 95.93 -0.59% -7.28%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -7 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR +10 basis points to +114bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +87bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +362bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +300bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1228 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
editing by Toby Chopra)
((marius.zaharia@reuters.com ; +40 21 315 8320; Reuters
Messaging: marius.zaharia.reuters.com@reuters.net ))
