BUDAPEST, Jan 12 (Reuters) - Central European currencies
gave up some ground early on Tuesday as the dollar recouped some
of Monday's losses, indicating lower risk appetite, and the
region's stock markets also retreated.
Dealers said normal liquidity has still not returned into
the market after the year-end and trading ranges remained
relatively tight but some of the assets in the European Union's
emerging markets could gain already in the short term.
"In CEE-3 (Poland, Hungary and Czech Republic) we are still
flirting with the lower end of the trading ranges in place since
December but with no break," SEB said in a morning note.
"We reiterate that we want a clear break of the ranges
before adding risk and until then a range-trading strategy
should be preferred. In the case of EUR/PLN we would target
4.02/4.00."
The Czech crown <EURCZK=>, a regional funding currency due
to its low interest rates, led early losses, easing 0.4 percent
versus the euro to 26.24 by 0827 GMT.
The Polish zloty <EURPLN=> shed 0.25 percent, Romania's leu
<EURRON=> 0.2 percent, while the Hungarian forint was flat.
The main indices of the region's stock markets fell by more
than 0.3 percent, led by Budapest's BUX <> which lost one
percent.
The crown gave up gains posted on Monday after a small
uptick in inflation signalled the central bank (CNB) likely had
no more room to ease policy [].
But expectations for central bank rate hikes later this year
and stronger fundamentals than elsewhere in the region could
buoy Czech and Polish currencies and bonds.
"High quality CEE sovereigns such as Poland and Czech
Republic offer good alternatives to real-money investors,"
Danske Bank said in a note on the region's markets.
Hungary's and Romania's more risky markets compensate
investors with much higher yields, but the two central banks are
expected to reduce interest rates further this year.
Romania's annual inflation was flat at 4.7 percent in
November, slightly lower than forecast, new figures showed on
Wednesday.
"We do believe that rate cuts will continue through the year
including at the next (rate-setting) meeting in February where
we expect 50 basis points cut (from 7.5 percent)," ING analyst
Nicolaie Alexandru-Chiedesciuc said.
The leu's high carry still remains attractive.
The leu can get additional support from a likely decision
later this week by Romania's two-house parliament to approve a
cost-cutting 2010 budget this week, a key condition to unlock a
stalled 20 billion euro IMF-led aid deal.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.238 26.14 -0.37% +0.3%
Polish zloty <EURPLN=> 4.072 4.062 -0.25% +0.79%
Hungarian forint <EURHUF=> 267.17 267.18 0% +1.19%
Croatian kuna <EURHRK=> 7.273 7.276 +0.04% +0.5%
Romanian leu <EURRON=> 4.13 4.123 -0.17% +2.6%
Serbian dinar <EURRSD=> 97.27 97.27 0% -1.43%
All data taken from Reuters at 0927 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto)
(Reporting by Sandor Peto; Editing by Andy Bruce)
