* Hungary cbank rates decision seen close, forint down
* Forint off 6-wk high, seen underperforming ahead
* Romania govt set to survive no-confidence vote
* Euro pressure remains, CEE rate decisions eyed this week
(Adds bonds, quotes)
By Jason Hovet
PRAGUE, Dec 20 (Reuters) - Losses for the Polish zloty were
capped at the key 4.00 per euro level on Monday, while the
Hungarian forint slipped from a multi-week high before an
expected close interest rate decision later in the day.
Analysts are evenly split whether Hungary's central bank
will stand pat on interest rates or raise them for a second
straight month to counter inflation risks. []
Some analysts have said the strengthening forint has
diminished the need for another rise for now. However, others
said the bank would still be worried about inflation
expectations and ongoing political and fiscal uncertainties.
The forint <EURHUF=> lost half a percent to 273.98 to the
euro by 1022 GMT, off a 6-week high. Bonds were quiet, but
dealers said a rate hike may lead to a small spike in yields.
A hike has been mostly priced-into the forint, and forward
rate markets have priced in 50 basis points in three months.
"Some weakening is conceivable if the rate hike does not
materialise today, but no forint move should be too
significant," a Budapest dealer said.
"I detect carry trade activity behind the EUR/HUF
performance of late. There is no fundamental reasons for the
forint to be where it is, except for interest rate speculation."
The bank surprised in November with the first policy
tightening in central Europe since the economic crisis started
two years ago. The Polish and Czech central banks, meeting on
rates on Wednesday, are not expected to follow until next year.
Several analysts have seen the Hungary rate move as part of
a policy battle with the centre-right Fidesz government whose
unorthodox fiscal policy has contributed to higher inflation
pressures and risk premiums, according to the central bank.
NO CONFIDENCE
Romania's leu <EURRON=> was flat ahead of the government's
third no-confidence vote this year, but markets expect the
coalition government to survive the challenge.
A loss would leave a political vacuum just as the country
needs to pass important wage legislation and a 2011 budget to
meet the terms of its International Monetary Fund bailout.
"These motions send a negative signal to investors and
prolonged political instability will affect foreign investments.
The market has priced-in that the government will survive the
vote", said Melania Hancila, Volksbank's chief economist in
Bucharest.
The Czech centre-right government will face on Tuesday its
first no-confidence vote since taking power in July.
It holds a commanding majority in the lower house and
analysts expect it to survive, but a junior coalition member has
not officially supported the government yet. []
The crown, whose lower yield has made it a funding currency
in intra-region trades recently, was steady at 25.23 per euro.
Stocks were mixed in the region, with Prague <> extending
gains and Warsaw <> down. In Poland, the zloty <EURPLN=>
dipped 0.4 percent, and analysts expected the psychological 4.0
per euro level to provide resistance to further weakening.
Dealers have said trade has thinned in the final weeks of
the year, which has at times exaggerated some moves. Central
European currencies have also been unable to break correlation
with their reference currency, the euro, which has been
pressured by a debt crisis in the euro zone periphery.
Rate hike expectations have boosted the forint 2 percent
this month, helping it outperform peers. But analysts have said
the zloty and crown would provide more value going into 2011
based on a better economic outlook and lower risk.
"Long PLN/CZK no longer looks attractive at these levels but
we continue to watch PLN/HUF for opportunities to buy," RBC said
in a Monday note.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.23 25.228 -0.01% +4.31%
Polish zloty <EURPLN=> 3.998 3.98 -0.45% +2.65%
Hungarian forint <EURHUF=> 273.98 272.58 -0.51% -1.32%
Croatian kuna <EURHRK=> 7.382 7.379 -0.04% -0.99%
Romanian leu <EURRON=> 4.288 4.287 -0.02% -1.18%
Serbian dinar <EURRSD=> 106.26 106.22 -0.04% -9.77%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 80bps over bmk*
7-yr T-bond CZ7YT=RR +8 basis points to +85bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +90bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +630bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +566bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +476bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1126 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 Jason Hovet; Editing
by Toby Chopra)
