* Leu breaks to top of range in run-up to polls
* Hungary bonds weaken in pre-auction positioning
* Caution stays as CEE extend gains
(Updates throughout)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Nov 18 (Reuters) - Romania's leu touched a
five-week high on Wednesday to gain with other central European
currencies that have been boosted by stronger investor appetite
on the back of a weaker dollar.
The leu broke to the strong side of the tight range it has
held since Romania's government collapsed last month. The unit
has been paralysed by worries over central bank intervention.
Markets there are looking ahead to the first round of
presidential elections on Sunday, the winner of which will pick
the next prime minister who will be responsible for getting the
country's IMF-led aid package back on track. []
By 1509 GMT, the leu <EURRON=> bid 0.4 percent stronger at
4.275 per euro, keeping pace with gains for the Hungarian forint
<EURHUF=> which extended gains to trade around a four-week high.
"Basically we track the euro/dollar and the region," one
Budapest-based dealer said.
The Polish zloty <EURPLN=> held gains at 4.097 to the euro
after data showed October wages grew less than expected, a
possible drag on economic recovery.
An infrastructure bonds tender on Thursday was also met with
weaker demand than some in the market had expected, dealers
said, although local yields held steady mostly. []
Markets await Polish output data on Thursday even as global
risk appetite has mostly overshadowed domestic factors. But
Poland has avoided recession this year unlike neighbours, and
dealers said a strong reading could boost the zloty.
CUT OR RUN
Elsewhere, the Czech crown <EURCZK=> was a touch up against
the euro, while bonds weakened to correct some recent gains and
as markets discount chances of another interest rate cut.
Dealers believe the next monetary move will depend on
currency strength. The crown trades near levels from
end-September before central bank chief Zdenek Tuma verbally
weakened it with talk of more easing. []
Markets expect Hungary's central bank to further cut rates,
currently at 7 percent compared to the Czechs' 1.25 percent. But
Hungarian bond yields rose on Wednesday as investors pushed
prices lower before Thursday auctions.
The spread between 3- and 10-year yields has widened to 40
basis points from about 15 basis points last month, and dealers
said it reflected nagging concerns for the country, among the
worst-hit in the economic crisis and holder of IMF aid.
Hungary's debt agency (AKK) has been in discussions with
dealers about launching a switch auction for government bonds
next week, fixed income traders said on Wednesday. []
The region's currencies have firmed around 4 percent this
month behind a weaker dollar reflecting appetite for emerging
assets, and signs economies are poised for recovery.
But the current positive outlook for the region could be
blurred by the recent widening of spreads between 'peripheral'
bonds in the euro zone and benchmark Bunds, BNP Paribas wrote.
Concerns centre on Greek bonds, due to a weaker fiscal
position, and on the eventual withdrawal of extra liquidity by
the European Central Bank. This combined could hit risk trade.
[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.461 25.475 +0.05% +5.07%
Polish zloty <EURPLN=> 4.097 4.104 +0.17% +0.44%
Hungarian forint <EURHUF=> 265.6 266.05 +0.17% -0.77%
Croatian kuna <EURHRK=> 7.315 7.317 +0.03% +0.68%
Romanian leu <EURRON=> 4.275 4.29 +0.35% -6.1%
Serbian dinar <EURRSD=> 94.451 94.22 -0.24% -5.26%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +6 basis points to 117bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +116bps over bmk*
10-yr T-bond CZ10YT=RR -3 basis points to +96bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +370bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +325bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +286bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +525bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +458bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +403bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1611 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
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World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz/Jason Hovet, editing by Mike Peacock/Ruth Pitchford)
