* Crown hits 27-mth high on solid economic outlook
* Other FX also stronger on euro
* Bonds stronger, Hungarian paper supported by fiscal plans
(Updates throughout)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Feb 1 (Reuters) - Central European currencies
mostly firmed on Tuesday, with the Czech crown hitting fresh
27-month highs after data boosted investor confidence that the
region is experiencing a solid economic rebound.
The Czech purchasing managers' index (PMI) hit a record high
in January and Poland's PMI continued to show manufacturing
growth although it dipped a touch after recording its third
highest monthly level in December. []
[]
Hungary's PMI, calculated under different methodology, also
rose. []
Stronger economic growth is expected to push interest rates
up further and boost central European currencies. []
The Polish zloty <EURPLN=> led gains, rising some 1.3
percent by 1439 GMT. The unit had weakened more than 3 percent
in the past few days as market players digested comments by
central bankers suggesting interest rates may not rise as
quickly as previously anticipated.
Dealers say they expect the euro/zloty pair to test its
support level of 3.88 against the euro and if it breaches that
level, the next support level will be at around 3.83 to the
common currency.
Other currencies were also stronger, with the Hungarian
forint <EURHUF=> up 0.9 percent to bid at 270.4 and the Czech
crown 0.9 percent stronger. The Romanian leu <EURRON=> was down
0.1 percent.
Currencies in the region also tend to track the euro, which
neared a two-month high against the dollar after a jump in euro
zone inflation fuelled expectations of earlier-than-forecast
rate hikes there.
BONDS UP
Bonds were also stronger across the region. Yields on
Hungarian paper were down some 5-14 basis points across the
curve on hopes that the government would announce a reform
package including spending cuts later this month.
A news website reported on Tuesday that Hungary's government
aims to cut its budget deficit by 700-800 billion forints ($3.5
billion-$4.0 billion) by 2013 under a three-year fiscal
adjustment plan to be unveiled this month. []
Polish bonds were also stronger and dealers said they may
extend their gains in the coming days.
"The debt issuance plan for this month is clearly soft, also
the recent selloff had nothing to do with fundamentals, so I
guess we're seeing a good buying opportunity now," said one
Warsaw-based dealer.
Stock markets were all in the black in the region, rising
0.2-1.6 percent as risk aversion linked to Egypt's ongoing
political crisis eased, though dealers said it continued to hang
over the market.
Investors are preparing for rate decisions in the Czech
Republic and Romania on Thursday. Both central banks are
expected to keep borrowing costs unchanged at record lows.
While Romania is expected to retain its loose policy for
some time, the Czechs are seen following the Hungarians and
Poles in raising interest rates this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.03 24.22 +0.79% +4.04%
Polish zloty <EURPLN=> 3.896 3.946 +1.28% +1.59%
Hungarian forint <EURHUF=> 270.4 272.91 +0.93% +2.8%
Croatian kuna <EURHRK=> 7.415 7.423 +0.11% -0.47%
Romanian leu <EURRON=> 4.255 4.253 -0.05% -0.52%
Serbian dinar <EURRSD=> 104.07 104.45 +0.37% +1.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 40bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +63bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +77bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +356bps over bmk*
5-yr T-bond PL5YT=RR -6 basis points to +342bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +307bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +498bps over bmk*
5-yr T-bond HU5YT=RR -16 basis points to +451bps over bmk*
10-yr T-bond HU10YT=RR -11 basis points to +403bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1539 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Susan Fenton)
