* Czech crown at 5-1/2 month highs, outperforms peers
* Hungary holds interest rates as expected
* Polish and Czech c.banks meet later in the week
(Adds bonds, updates prices)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, June 22 (Reuters) - The Czech crown rose
near its highest level since the start of the year on Monday,
outperforming central European peers as investors sought safer
havens in the region.
In Hungary, the forint reversed earlier gains to ease after
the central bank held interest rates steady at 9.5 percent as
expected, keeping the Hungarian unit's higher yield.
[]
The crown has jumped 3 percent in the past week, lifted by
unwinding of long Polish zloty/crown trades as investors closed
intra-region positions favouring the zloty.
Dealers have said stop losses amid low market liquidity has
added to gains in the crown, which early in the session traded
just short of a 2009 high of 25.85 to the euro seen on Jan. 6.
By 1456 GMT, the Czech currency <EURCZK=> was bid at 26.04
per euro, up 0.6 percent from Friday's domestic close. The
forint <EURHUF=> was down 0.6 percent at 280.35.
"We are seeing foreign sellers (of euros)," said one Prague
trader. "There are some speculative sales, and I think it is a
new story on (the crown as a) safe haven."
The crown <EURCZK=> has typically been seen as less risky
due to the country's lower indebtedness and stronger current
account balance. At the same time, Poland, despite avoiding
economic contraction unlike neighbours, is expected to revise
its budget gap target upward next month. []
"The expected budget revision weighs on the zloty," said
Andrzej Bowtruczuk, FX dealer at BRE Bank in Warsaw.
However, analysts expect a correction on the crown moves,
arguing the move still doesn't reflect the real economic
situation as central Europe's export-heavy economies suffer as
they wait for euro zone consumption to rebound.
The crown and forint traded at multi-year highs against the
Polish zloty. The zloty <EURPLN=> fell 1 percent against the
euro to 4.533, while the Romanian leu <EURRON=> traded off 0.3
percent.
Goldman Sachs said on Friday it was knocked out of its
PLN/CZK trade but maintained the zloty should appreciate above
the crown due to strong fundamentals.
RATE MOVES
Hungary kicked off a round of regional central bank
decisions, but is seen as the only one in the region to keep
rates on hold this week. It said a lasting improvement in risk
sentiment would open space for easier monetary policy.
The forint has gained around 13 percent in volatile trade
since touching an all-time low of 317 to the euro in March.
"Financial stability is still a top priority, and the
Council would refrain from re-entering the easing cycle as long
as they are not fully confident that the recent improvement in
the market conditions is a lasting phenomenon," said Mariann
Trippon, analyst at CIB Bank.
Central Europe bond markets were flat on Monday, with
Hungarian bonds paring early gains after the rate decision.
Quarter point cuts are expected in Poland on Wednesday and
the Czech Republic on Thursday. [] []
Romania is also widely expected to chop 50 basis points off
its 9.5 percent benchmark rate next week. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.04 26.195 +0.6% +2.74%
Polish zloty <EURPLN=> 4.533 4.489 -0.97% -9.22%
Hungarian forint <EURHUF=> 280.35 278.61 -0.62% -5.99%
Croatian kuna <EURHRK=> 7.259 7.27 +0.15% +1.46%
Romanian leu <EURRON=> 4.227 4.214 -0.31% -5.03%
Serbian dinar <EURRSD=> 93.013 92.62 -0.42% -3.8%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +33 basis points to 152bps over bmk*
4-yr T-bond CZ4YT=RR +2 basis points to +178bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +289bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +386bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +328bps over bmk*
10-yr T-bond PL10YT=RR +7 basis points to +292bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +804bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +760bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +686bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1658 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia and
Jason Hovet, Editing by Ruth Pitchford and Andy Bruce)
