* Leu outperforms with IMF deal, strong dlr hits FX
* Hungary local bonds unmoved by dollar issue
* Czech markets eye new 3-year bond sale
(Adds bonds, updates prices)
By Jason Hovet
PRAGUE, Jan 27 (Reuters) - The leu edged higher on
Wednesday, while other emerging European currencies slipped
behind a stronger dollar, after the IMF signed off on the next
payments from Romania's 20 billion euro aid deal.
The International Monetary Fund completed a review of reform
plans, saying the next tranches of the deal would be released to
Romania in mid-February. []
Romania's parliament approved a cost-cutting 2010 budget
earlier this month, reopening the way for the IMF and European
Union aid package that had been held up at the end of last year
by a political impasse.
Financial markets have been eagerly awaiting resumption of
IMF/EU money flows. Economists say the deal will provide
badly-needed funding and could allow the central bank to
stimulate the battered economy by cutting interest rates.
The leu <EURRON=> was bid up 0.2 percent at 4.115 to the
euro by 1005 GMT, outperforming others in the region like the
Hungarian forint <EURHUF=>, which fell 0.5 percent.
"This is good news for the currency," said Lutz Karpowitz, a
strategist at Commerzbank.
"Expectations were that they would not have too many
problems left to fix the deal with the IMF, so the market impact
should be limited. But it makes investments in the currency
safer; the risk premium is lower," he added.
The Czech crown <EURCZK=> also lost 0.4 percent along with a
0.2 percent drop for the Polish zloty <EURPLN=> as a stronger
dollar cut appetite for riskier emerging market assets.
Stock markets, after hitting multi-month highs in January,
also continued their slide this week. Budapest dropped the most
with a 0.8 percent fall <>.
LEU ADVANTAGE
Some dealers said the forint was losing out in regional
cross trades that sold the Hungarian unit to buy peers.
"The leu, especially, is bought at the forint's expense, and
the zloty as well," a Budapest dealer said.
The leu has posted the strongest gains of central European
currencies this year with a 3 percent rise since Jan 1. A new
government ended a months-long political deadlock in Romania,
particularly hard hit by the global downturn. []
Analysts, though, say the centrist coalition will have a
tough time pursuing their IMF-mandated reform agenda because of
stiff leftist opposition in parliament.
Analysts in a Reuters poll earlier this month have forecast
the leu to weaken over the next three months to 4.2 to the euro,
while other currencies to hold roughly steady. <CEEFXPOLL09>
Hungary is the other country in the region that sought
external aid during the global financial crisis, although it
took a first step towards coming off aid this week with the sale
of $2 billion worth of dollar-denominated debt. []
Bids for the 10-year bond totalled nearly $7 billion,
Hungary's debt agency said on Wednesday. []
Hungarian bonds were unmoved in early trading on Wednesday.
Czech bonds, meanwhile, were a touch up before an auction of
a new 3-year bond, with strong demand expected from cash-rich
local banks that have favoured short-term debt in the past.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.138 26.023 -0.44% +0.69%
Polish zloty <EURPLN=> 4.085 4.075 -0.24% +0.47%
Hungarian forint <EURHUF=> 272.13 270.81 -0.49% -0.65%
Croatian kuna <EURHRK=> 7.291 7.291 0% +0.25%
Romanian leu <EURRON=> 4.115 4.122 +0.17% +2.97%
Serbian dinar <EURRSD=> 97.89 97.71 -0.18% -2.05%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 89bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +136bps over bmk*
10-yr T-bond CZ10YT=RR -1 basis points to +125bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1105 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Ruth Pitchford)
