* Leu stable ahead of crucial vote on new govt
* Forint underperforms after recent weakening
* Poland mulls withholding money from pension funds
(Adds bonds, comments, updates market)
By Marton Dunai and Gergely Szakacs
BUDAPEST, Nov 4 (Reuters) - Central European currencies were
mixed on Wednesday, with the Hungarian forint underperforming
after a recent big weakening and the Romanian leu stable before
a parliament vote on a new cabinet, which is expected to fail.
At 0944 GMT the leu <EURRON=> was flat and dealers said they
expected range trading ahead of the vote for the proposed
cabinet of Prime Minister designate Lucian Croitoru.
"The market has already priced in a negative vote," said one
dealer with a foreign bank in Bucharest.
The leu got some support from the central bank unexpectedly
keeping its main interest rate unchanged at 8 percent on
Tuesday, citing risks stemming from the government crisis, which
has threatened Romania's IMF deal. []
Hungary's caretaker government survived a key vote late on
Tuesday, when parliament approved the cornerstone figures of the
2010 budget. []
The forint <EURHUF=>, however, weakened 0.2 percent in thin
trading as investors remained edgy after a recent brief
weakening that saw the forint shoot past 280 against the euro.
"Some people may have seen yesterday's weaker levels as a
sign that there is room to weaken more," a dealer in Budapest
said. "But at 278.50, there are strong offers in the EUR/HUF."
The region's currencies have been under pressure since last
week as appetite for risk weakened in global markets, also
hitting equities in the world and the region.
A recent wave of emerging market profit-taking was limited,
however, and a return to the "dark days of 2008" was unlikely,
Barclays said in a note.
Stock markets around the region rebounded on Wednesday, led
by the Budapest bourse, which was up 2.3 percent at 0953 GMT.
A recent Reuters poll of analysts also showed central
European currencies would return to the past few months' firming
trend by 2010 and post solid gains in the next 12 months, led by
the zloty. []
In Hungary, the central bank said on Wednesday the bank
sector would weather rising loan losses in 2010 and remain
profitable with no need for capital injections. []
The bank will publish the minutes of its October rate
meeting, when it cut rates to 7 percent, at 1300 GMT.
Serbia said talks with the International Monetary Fund (IMF)
had ended "successfully" as it seeks more aid in exchange for a
deal on budgets going forward.[][] The
dinar<EURRSD=> was steady.
Latvia's prime minister, meanwhile, said that the government
could break up once budget cuts have been achieved to ensure
international aid.[]
BONDS MIXED
Polish bonds strengthened marginally as markets were trying
to figure out the potential impact of planned changes to the
pension system, said Pawel Bialczynski, dealer at BRE Bank.
Poland wants to reduce the amount of money it transfers to
private pension funds to help keep down government borrowing,
local papers quoted the finance minister as saying on Wednesday.
Starting in 2010, Poland may cut such contributions in half,
which would save the state 13 billion zlotys ($4.4 billion) at
the expense of private funds, which are major players on the
Polish market. []
Czech bonds were mixed on Wednesday before the central
bank's rate meeting on Thursday, widely expected to hold rates
at the record low of 1.25 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.189 26.201 +0.05% +2.15%
Polish zloty <EURPLN=> 4.267 4.279 +0.28% -3.56%
Hungarian forint <EURHUF=> 277.41 276.8 -0.22% -5%
Croatian kuna <EURHRK=> 7.268 7.266 -0.03% +1.33%
Romanian leu <EURRON=> 4.298 4.299 +0.02% -6.6%
Serbian dinar <EURRSD=> 94.21 94.22 +0.01% -5.02%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +2 basis points to +91bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +100bps over bmk*
10-yr T-bond CZ10YT=RR -14 basis points to +93bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +358bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +319bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +281bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +542bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +492bps over bmk*
10-yr T-bond HU10YT=RR -3 basis points to +427bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1044 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Gergely Szakacs;
editing by Chris Pizzey)
