* Most currencies weaken, leu extends gains on IMF deal
* Hungary opposition backs PM nominee, S&P cuts
* Czechs agree early elections
* Risk aversion picks up on U.S. auto news
(Updates with S&P on Hungary)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, March 30 (Reuters) - The forint slid on
Monday when Standard & Poor's cut Hungary's rating to one notch
above junk, and investors' risk aversion overshadowed the choice
of the country's new prime minister to lead it out of crisis.
Hungary's prime minister designate Gordon Bajnai won backing
from the main political parties on Monday and promised to
restart reforms, but analysts and dealers raised doubts over
what impact he could have and markets gave a cool reception.
Later in the day, S&P ratings agency cut Hungary's long-term
foreign and local currency credit ratings to BBB-, from BBB,
with a negative outlook due to deterioration in economic and
fiscal indicators there. [] []
By 1542 GMT, the forint shed 2.3 percent from Friday's close
to 311.5 to the euro, and bond yields rose. Poland's zloty
<EURPLN=> lost 1.9 percent to 4.734 per euro.
"This should be a strong wake up call for all political
parties to push ahead with desperately needed reforms, as the
alternative will be a further strong depreciation of the
forint," Cheuvreux emerging market strategist Simon
Quijano-Evans said in a note.
"With elections planned for 2010 anyway, markets have very
little hope in any short-term government change in 2009."
Currencies also followed stocks lower as investors also
shunned riskier emerging assets after a U.S. taskforce rejected
turnaround plans for two of the big three carmakers and Spain
bailed out its first bank. []
The choice of Bajnai, Hungary's economy minister, to replace
outgoing Prime Minister Ferenc Gyurcsany ended a week-long
search for a successor, but left short-term doubts.
[]
"We do not suggest taking positions on Hungarian bonds or on
the forint market," Budapest-based Raiffeisen analyst Zoltan
Torok said in a note.
NO NEWS IS NOT GOOD NEWS
The fall of the Czech government last week piled pressure on
currencies already reeling under growing worries over growth,
banks and financing.
Czech leaders agreed over the weekend on an early election,
although the timing and who would lead the country in the
meantime was still uncertain. []
The crown <EURCZK=> lost 1.3 percent to 27.66 per euro.
Government bond yields edged higher on Monday, hit by
weakening currencies. In Poland the finance ministry was due to
release its upcoming debt supply late on Monday or on Tuesday.
"We continue to expect political newsflow to act as a drag
on regional markets in the near term," UniCredit said.
Political nerves hung on currencies last week, but markets
found some relief in a global stocks rally and confirmation of
International Monetary Fund aid packages for Serbia and Romania
-- with the latter becoming the third EU member to seek outside
aid after Latvia and Hungary.
The leu <EURRON=> extended gains from last week's IMF deal
on Monday, rising 0.5 percent to a seven-week high, and dealers
said it was likely due to covert central bank interventions.
[]
However, Fitch ratings agency said on Monday the IMF deal
wasn't yet enough to boost Romania's rating. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.661 27.298 -1.31% -3.28%
Polish zloty <EURPLN=> 4.734 4.643 -1.92% -13.08%
Hungarian forint <EURHUF=> 311.46 304.35 -2.28% -15.38%
Croatian kuna <EURHRK=> 7.478 7.456 -0.29% -1.51%
Romanian leu <EURRON=> 4.222 4.243 +0.5% -4.92%
Serbian dinar <EURRSD=> 94.54 94.537 0% -5.35%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -18 basis points to 193bps over bmk*
4-yr T-bond CZ4YT=RR +37 basis points to +241bps over bmk*
8-yr T-bond CZ8YT=RR +1 basis points to +319bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +433bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +381bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +326bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +66 basis points to +1223bps over bmk*
5-yr T-bond HU5YT=RR +66 basis points to +1064bps over bmk*
10-yr T-bond HU10YT=RR +67 basis points to +918bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1646 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 and
Jason Hovet, Editing by Victoria Main)
