* Forint, zloty pull back from highs
* Stocks snap winning streak
* Polish bonds up a touch after Wednesday auction
(Adds details, bonds)
By Jason Hovet
PRAGUE, May 21 (Reuters) - The Polish zloty fell almost 1
percent on Thursday to lead a central European retreat after
stock markets dropped and a sharp rally in the region's
currencies paused.
Central European currencies had jumped this week on the back
of equity gains and hopes that the global downturn is finding a
bottom.
The Polish zloty <EURPLN=> slipped 0.9 percent to bid at
4.382 per euro and Hungary's forint <EURHUF=> dropped 0.3
percent from Wednesday's domestic close to 276.65 by 0830 GMT.
European shares ended a five-day winning streak to weigh on
central European bourses, which dropped more than one percent.
The zloty and forint have led gains this week with a 3-4
percent rise on higher appetite for emerging European assets,
although gains were getting ahead of themselves, dealers warned.
"We have firmed too much, too quickly without fundamentals
supporting this," a Budapest dealer said. "The forint has firmed
through several technical levels already and technicals continue
to point to weakening."
The zloty has jumped the most among its peers from lows in
February, but still trades 23 percent down from the end of June
last year, while the forint is off 15 percent in that time.
Dealers said currencies could get support from a weaker
dollar, suggesting investors may return to risk and benefit
central Europe, which generally gains when risk sentiment rises.
The dollar fell to a five-month low against a basket of
currencies on Thursday after the Federal Reserve said it
considered buying more securities at its last policy meeting.
[]
BOND SALES
The Czech crown <EURCZK=> fell 0.3 percent to 26.64 to the
euro. Moody's ratings agency cut its outlook on the Czech
banking system to negative late on Wednesday, but dealers said
the move should have limited impact. []
"It still looks like the crown is going to be locked in
ranges for ages," a dealer said.
Czech bonds edged lower on the week after a Wednesday
auction drew thinner demand than that seen in previous
short-term sales, while Polish yields dropped after a strong
auction result from the previous session. []
Dealers in Budapest awaited a Thursday auction to see if
real demand existed at current prices. Hungarian yields have
dropped 4 percentage points since highs in March, and now trade
around 10 percent, also helped by debt agency buybacks.
Central Europe has come under heavy strain in the global
downturn, with foreign orders dropping sharply and unemployment
growing, which analysts say will pressure banks.
Foreign banks operating in Hungary and Romania, two European
Union members that have taken external aid, have pledged to
support their local units in the financial crisis.
[] []
Romania's leu <EURRON=> bid 0.5 percent down at 4.168 to the
euro on Thursday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.64 26.551 -0.33% +0.42%
Polish zloty <EURPLN=> 4.382 4.342 -0.91% -6.09%
Hungarian forint <EURHUF=> 276.65 275.77 -0.32% -4.74%
Croatian kuna <EURHRK=> 7.335 7.335 0% +0.41%
Romanian leu <EURRON=> 4.168 4.148 -0.48% -3.69%
Serbian dinar <EURRSD=> 94.16 94.252 +0.1% -4.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +16 basis points to 154bps over bmk*
4-yr T-bond CZ4YT=RR 0 basis points to +185bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +266bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +422bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +325bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +279bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +840bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +759bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +642bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1032 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by David Stamp)
