(Adds details, fixed income)
WARSAW, Oct 8 (Reuters) - The Polish zloty fell to its
lowest level since April to lead a retreat in central Europe on
Wednesday as the financial crisis continued to unnerve investors
and global growth concerns sent stocks lower.
Regional currencies have swung widely this week as questions
rise over western banks' stability and concerns grow that the
global economy is in for a deep slowdown, hitting
export-dependent central European states.
The zloty <EURPLN=> plunged 2.5 percent to 3.498 to the euro
by 0835 GMT, trading above 3.50 at one point and pacing a 1.6
percent fall for Hungary's forint <EURHUF=>, which weakened
above the key 250 per euro level.
"Risk aversion is growing and investors are retreating from
risky assets. The zloty remains volatile in the short-term and
further weakening is not ruled out," said Deutsche Bank chief
economist Arkadiusz Krzesniak.
Markets got hit further overnight after a speech from the
Federal Reserve's head, Ben Bernanke, who suggested a gloomier
economic outlook and a rate cut at the upcoming FED meeting.
Asian and European stocks sold off, with eastern European
bourses all touching multi-year lows [] and Romanian
authorities halting trading on the bourse there after heavy
losses [].
Economies in central Europe have come under strain in recent
months due to weakening demand from the euro zone, with growth
outlooks dimming further in recent weeks, helping shift
expectations towards interest rate cuts.
The shift has been most dramatic in Poland, where just a
month ago analysts had expected tighter monetary policy to
combat inflation as the government prepares for euro adoption by
2012. Analysts said that has changed.
"Yesterday's comment by the Polish central bank's head
prompted us to believe that the Monetary Policy Council is
unlikely to raise interest rates at the October meeting,"
analysts at BPH bank in Warsaw wrote in a morning note.
On Monday Poland's central bank's governor Slawomir Skrzypek
said the ongoing global financial crisis will have an impact on
Poland's monetary policy. He gave no further details but markets
read his statement as supporting doves on the bank's council.
Among other currencies, the Romanian leu <EURRON=> traded
0.5 percent lower at 9.29 to the euro as the currency searched
for direction.
The Czech crown <EURCZK=> traded 0.2 percent down to 24.645,
while bonds remained stable after higher than expected inflation
data on Wednesday, although analysts still expect rate cuts this
year.
"The economic outlook is now more important than inflation,
so the central bank will probably cut interest rates in
November," said Pavel Sobisek, chief economist at UniCredit in
Prague.
Bonds in Hungary and Poland were little moved on Wednesday
and dealers said the market overall is grasping for any new
trend to follow.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.645 24.589 -0.23% +6.99%
Polish zloty <EURPLN=> 3.498 3.414 -2.46% +2.85%
Hungarian forint <EURHUF=> 252.890 248.930 -1.59% -0.02%
Croatian kuna <EURHRK=> 7.128 7.131 +0.04% +2.71%
Romanian leu <EURRON=> 3.929 3.910 -0.49% -9.74%
Serbian dinar <EURRSD=> 80.110 80.120 +0.01% -1.71%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +30 basis points to 61bps over bmk*
5-yr T-bond CZ5YT=RR +21 basis points to +42bps over bmk*
10-yr T-bond CZ9YT=RR +28 basis points to +44bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +18 basis points to +312bps over bmk*
5-yr T-bond PL5YT=RR +12 basis points to +265bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +218bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +691bps over bmk*
5-yr T-bond HU5YT=RR +10 basis points to +649bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +495bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1035 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus; Writing by Dagmara
Leszkowicz; Editing by Victoria Main)
