* Czech crown at 5-1/2 month highs, outperforms peers
* Crown and Hungarian forint benefit on cross trades
* Hungary is expected to keep rates on hold on Monday
* Polish and Czech c.banks meet later in the week
(adds detail, quotes, fixed income)
By Marius Zaharia
BUCHAREST, June 22 (Reuters) - The Czech crown and the
Hungarian forint outperformed their peers on Monday, driven by
cross trades and technical factors, while investors eyed a
central bank meeting in Budapest.
The Czech crown traded at a 5-1/2 month high after busting
past technical levels last week, mostly as investors started to
close intra-region positions favouring the zloty, built over the
past months when the zloty was seen outperforming.
The crown <EURCZK=> has traditionally been seen as a safer
investment in the region due to the country's lower indebtedness
and stronger current account balance, while an expected rise in
Poland's budget deficit has triggered some concerns
[].
"We can see some pressure on the crown to go stronger," said
a local trader, adding the moves now were more technically
driven than news driven. "The market will try to crash 26."
The forint <EURHUF=> also gained on unwinding of long zloty
cross trades in the region, but less than the crown.
"To the extent that on valuation grounds the market was
likely long in (zloty/forint and zloty/Czech) crosses ...
further position squeeze in the near term ... could prove forint
and Czech crown supportive," UniCredit analysts said.
By 0924 GMT, the Czech crown <EURCZK=> gained over 1
percent, to below 26 to the euro, while the Polish zloty
<EURPLN=> fell 0.2 percent. The Hungarian forint <EURHUF=>
gained 0.2 percent and the Romanian leu <EURRON=> traded flat.
The zloty is still seen the top performer over a 12-month
horizon as its current status of being the region's punching
bag, having lost almost 9 percent this year, does not reflect
Poland's stronger fundamentals, dealers said.
HUNGARY SEEN HOLDING RATES
Investors eyed Hungary, which is seen as the only major
economy in the region to keep rates on hold this week, at 9.5
percent, with cuts expected in Poland and Czech Republic on
Wednesday and Thursday and in Romania at the end of the month.
"The Hungarian rate decision is unlikely to provide any
surprises," Commerzbank said in a note.
"It would put massive pressure on the forint if the central
bank were to give in. The central bank ... will therefore want
to avoid any negative surprises for the market."
Central European currencies have been under pressure in the
past week as data and comments from policymakers bolstered
expectations for monetary easing.
The Polish central bank is seen cutting its key rate by 25
basis points to 3.5 percent on Wednesday [], and on
Thursday the Czech bank is expected to make the final cut in its
easing cycle by 25 basis points to 1.25 percent.[]
Romania is also widely expected to chop 50 basis points off
its 9.5 percent benchmark rate. []
Polish and Hungarian debt markets were quiet. Budapest
dealers said a surprise cut in rates may send yields on 2019/A
and 2023/A bonds below 9 percent.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.918 26.195 +1.07% +3.22%
Polish zloty <EURPLN=> 4.499 4.489 -0.22% -8.54%
Hungarian forint <EURHUF=> 277.96 278.61 +0.23% -5.18%
Croatian kuna <EURHRK=> 7.274 7.27 -0.05% +1.25%
Romanian leu <EURRON=> 4.216 4.214 -0.05% -4.78%
Serbian dinar <EURRSD=> 92.6 92.62 +0.02% -3.37%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +13 basis points to 133bps over bmk*
4-yr T-bond CZ4YT=RR -21 basis points to +155bps over bmk*
8-yr T-bond CZ8YT=RR +8 basis points to +287bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +327bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +21 basis points to +803bps over bmk*
5-yr T-bond HU5YT=RR +19 basis points to +767bps over bmk*
10-yr T-bond HU10YT=RR +21 basis points to +677bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1224 CET.
Currency percent change calculated from the daily domestic
close at 1600 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=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Marius Zaharia,
Editing by Ruth Pitchford)
