* Forint, zloty pull back from highs
* Stocks snap winning streak
* Hungary cuts back on 10-year bond auction
(Adds Hungary bond auction, details, new prices))
By Jason Hovet
PRAGUE, May 21 (Reuters) - The Polish zloty fell around 1
percent on Thursday to lead a central European retreat after
major 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 the global downturn is at a bottom.
But with investors booking profits and less demand for the
region on Thursday, Hungary cut a 10-year bond auction, a slight
stumble as it continues in restarted debt sales after a nearly
half-year pause. []
The Polish zloty <EURPLN=> slipped 1.1 percent to bid at
4.391 per euro and Hungary's forint <EURHUF=> dropped 0.65
percent from Wednesday's domestic close to 277.57 by 1039 GMT.
Major European share indexes ended a five-day winning streak
to weigh on central European bourses, which dropped 1-2 percent.
The zloty and forint have led gains this week with a 3-4
percent rise on higher appetite for emerging European assets,
although the rise was getting ahead of itself, 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.
The fragile forint is expected to be a strong factor forcing
Hungary's central bank to hold fire on interest rates at a
policy meeting on Monday. []
But dealers said currencies could still draw support from a
weakening dollar, suggesting investors may return to risk in the
near term and help central Europe, which generally gains when
risk sentiment rises. []
BOND SALES
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. []
The Czech crown <EURCZK=> fell 0.4 percent to 26.65 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. []
The World Bank said on Thursday the 10 ex-communist European
Union economies could contract by about 3 percent in 2009.
[]
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 0.4 percent down at 4.164 to the
euro on Thursday.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.651 26.551 -0.38% +0.38%
Polish zloty <EURPLN=> 4.391 4.342 -1.12% -6.29%
Hungarian forint <EURHUF=> 277.57 275.77 -0.65% -5.05%
Croatian kuna <EURHRK=> 7.318 7.335 +0.23% +0.64%
Romanian leu <EURRON=> 4.164 4.148 -0.38% -3.59%
Serbian dinar <EURRSD=> 94.303 94.252 -0.05% -5.11%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +23 basis points to 161bps over bmk*
4-yr T-bond CZ4YT=RR +4 basis points to +189bps over bmk*
8-yr T-bond CZ8YT=RR +14 basis points to +270bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1240 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/Ruth Pitchford)
