* Budget details key for HUF, but volatility may continue
* Zloty hit by intra-region cross plays
* Leu lacks momentum to break 200-day avg 4.26 per euro
(Adds fixed income, detail, fresh quotes)
By Marius Zaharia
BUCHAREST, Oct 29 (Reuters) - The forint held steady on
Friday while investors awaited full details of Hungary's budget
plans for next year, as some of related measures have caused
large asset swings in recent months.
The zloty extended losses after the central bank
disappointed some market players earlier this week by leaving
interest rates unchanged, triggering intra-region cross plays
against the Polish unit.
Hungary's Fidesz government is expected to tell parliament
before a Sunday deadline how it plans to cut its budget deficit
to below 3 percent of gross domestic product. []
Its September pledge to cut the deficit helped the forint
firm up about 5 percent to the euro, but later announcements of
unorthodox measures such as special taxes for parts of the
corporate sector and the suspension of payments to private
pension funds have spooked investors again.
Markets will be trying to gauge how realistic the economic
assumptions in the budget are and whether the draft includes
measures to trim a bloated public sector.
"The degree of cuts on the expenditure side is key for
market reaction and the HUF," Deutsche Bank's senior fx
strategist Henrik Gullberg said in the note.
"HUF is good value at these levels and conditional on no
further negative surprises on the fiscal front on Friday, we
believe a sustained break of the 200-day moving average (around
275 per euro) would trigger a move down to 262.50."
However some analysts say the forint may come under pressure
again if ratings agencies express concerns about the pension
move and special taxes.
As of 0911 GMT, the forint <EURHUF=> was down 0.1 percent on
the day, at 273.25 per euro after having broken the key 275
level in the previous session. Romania's leu <EURRON=> and the
Czech crown <EURCZK=> were also little changed, while the Polish
zloty <EURPLN=> was 0.5 percent weaker.
Regional bond markets were also stable in thin trade, ahead
of Polish November debt supply details due later in the day.
Investors were awaiting U.S. third-quarter GDP data later in
the day.
CROSS TRADES AGAINST THE ZLOTY
The forint could be helped in the short term by the
continued unwinding of zloty/forint positions. The Polish
central bank's October inflation report showed on Friday it had
voted 6-4 against a 50 basis point rate hike at its August
sitting. []
Closing of such positions pushed the forint up by 1 percent
against the euro on Thursday. On Friday, the forint traded at
68.647 per zloty <PLNHUF=R>, below its 200-day moving average at
69.06.
"We continue to maintain a long positioning in forint/zloty
where the relative HUF gains have seen the currency pair
overtake the resistance," Danske said in a note.
The crown and the zloty were on target for their first
monthly declines since June.
"The Czech koruna is outperforming the Polish zloty, which
these days is the weakest link amongst the CE3. PLN/CZK is now
testing 6.16/17 support area," 4Cast analysts said.
Romania's leu hovered above its 200-day moving average at
4.26 per euro, with little strength to break below that even
though investors were relieved to see the government survive a
no-confidence vote earlier this week.
Markets are watching for any comments from an IMF mission
which is in Bucharest until Nov. 1 to review a 20 billion euro
aid deal.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.648 24.623 -0.1% +6.78%
Polish zloty <EURPLN=> 3.993 3.973 -0.5% +2.78%
Hungarian forint <EURHUF=> 273.25 273.07 -0.07% -1.06%
Croatian kuna <EURHRK=> 7.341 7.336 -0.07% -0.43%
Romanian leu <EURRON=> 4.262 4.266 +0.09% -0.58%
Serbian dinar <EURRSD=> 107.58 107.47 -0.1% -10.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 83bps over bmk*
7-yr T-bond CZ7YT=RR +13 basis points to +94bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +370bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +343bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +310bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +543bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +514bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +453bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1111 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marius Zaharia; editing by Hugh Lawson and
Catherine Evans)
