(Recasts after close)
By Jason Hovet
PRAGUE, Aug 20 (Reuters) - Emerging European currencies were
inched higher on Wednesday while a weak set of Polish data
prompted bets that interest rates in the region's largest
economy have peaked, sending bond yields lower.
Yields fell 5 basis points after industrial output and
producer prices both rose more slowly than expected in July,
suggesting the central bank has little or no room left to move
as the economy slows in the face of weaker euro zone demand.
The zloty, as well as Romania's leu, Croatia's kuna and the
Serb dinar, all gained. The Czech crown was only a touch weaker,
taking a breather from a fall of around 6 percent in the last
month.
By 1502 GMT, the zloty <EURPLN=> had gained 0.5 percent to
3.306 to the euro. The crown <EURCZK=> fell to 24.381 per euro
from 24.375, unmoved by central banker comments leaving open the
possibility of further interest rate cuts.
Hungarian markets were closed for a public holiday.
In the longer-term, analysts said the slip in Polish growth
rates may be bad news for the zloty after a year in which it has
surged to record highs against the dollar and euro.
Until recently, investors were backing Warsaw's central bank
to raise the yield on zloty assets by up to another 50 basis
points.
"The slowdown in Poland's industrial production is yet
another argument to keep interest rates on hold at next week's
Monetary Policy Council meeting," said Lars Christensen, chief
analyst at Danske Bank in Copenhagen.
"The monetary tightening cycle in Poland has come to an
end."
The central bank has hiked rates eight times since April
2007, bringing the main rate to 6 percent in June as prices that
month rose at the fastest pace in seven years.
A Reuters poll earlier in August showed analysts expected
the central bank to keep rates unchanged next week but raise
them again in September due a still grim outlook on inflation.
The Czech central bank cut interest rates on Aug. 7 to knock
back the surging crown, becoming the first in the region to
loosen policy, although analysts don't see other banks following
suit until the start of 2009 as inflation risks still remain.
Bank Deputy Governor Miroslav Singer said on Wednesday that
more time was needed to assess the cut's impact, or whether more
loosening will be needed. Fellow board member Vladimir Tomsik
said a next move in any direction could not be excluded.
Their views failed to weaken the crown, which has lost 6
percent since hitting a record 22.925 to the euro on July 21 --
the day before central bankers began warning its strength
threatened an undershoot of its inflation target.
Elsewhere, the Romanian leu <EURRON=> strengthened to 3.519
from Tuesday's close of 3.52 per euro, and the Serb dinar
<EURRSD=> was up 0.3 percent at 76.40 to the euro.
Croatia's kuna <EURHRK=> rose 0.2 percent to 7.166 per euro.
*************************MARKET SNAPSHOT************************
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.381 24.375 -0.02% +7.99%
Polish zloty <EURPLN=> 3.306 3.323 +0.51% +8.18%
Hungarian forint <EURHUF=> 233.320 235.590 +0.96% +7.72%
Croatian kuna <EURHRK=> 7.166 7.182 +0.22% +2.19%
Romanian leu <EURRON=> 3.519 3.521 +0.06% +1.71%
Serbian dinar <EURRSD=> 76.400 76.630 +0.30% +3.00%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -2 basis points to -7bps over bmk*
5-yr T-bond CZ5YT=RR +1 basis points to +1bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +23bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +224bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +206bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +183bps over bmk*
*Benchmark is German bond equivalent.
All bond data taken from Reuters at 0945 CET.
All currency data taken from Reuters at 1702 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet)
