(Adds details, fixed income)
By Jason Hovet
PRAGUE, Sept 19 (Reuters) - U.S. plans to clean up the toxic
assets that have jammed credit markets drove emerging European
currencies and stock markets higher on Friday, with Poland's
zloty and Hungary's forint leading the way.
The zloty <EURPLN=> rose nearly 1 percent before easing to
3.32 to the euro by 0830 GMT, or 0.4 percent up from Thursday's
domestic close.
Market watchers said Warsaw's declaration of a drive over
the next 2-3 years to prepare to join the euro could help it
break away from its regional peers if global turmoil subsides.
"A rebound in stock markets and an improvement in the
overall mood is driving the zloty," said Jan Koprowski, a
currency dealer at BNP Paribas in Warsaw. "If the market calms,
it is positive for the zloty."
Regional stock markets opened 3 to 6 percent higher on
Friday following the best day in six years for U.S. stocks,
which soared on news U.S. policymakers were working on a plan to
clean up mortgage-related debt.
Other currencies followed the rally, including the forint
<EURHUF=> with a gain of 0.7 percent to 240.67 per euro, and
Romania's leu <EURRON=> added 0.65 percent to 3.64 to the euro.
CRUNCH
The credit crunch that started more than a year ago reached
new levels this week, beginning with the bankruptcy protection
filing of Lehman Brothers and moving to a U.S. bailout of
insurance giant American Insurance Group.
Emerging markets have swung widely, causing havoc in Russia,
where officials shut the bourse on Wednesday and Thursday.
But central Europe, whose economies are still playing
catch-up and where lending habits remain conservative, has been
somewhat insulated from global credit concerns, although share
prices of the region's real estate firms have been punished.
On Friday, dealers pointed to narrowing currency spreads,
indicating markets were calming.
The Czech, Hungarian, Polish and Romanian currencies have
fallen back in recent weeks due to slower economic growth in
Europe and scaled back expectations for higher interest rates.
But the zloty has surged since officials said it could
qualify for the euro in 2011 and likely join a year later.
Analysts say the central bank may hike rates to cut
inflation and brace the economy for a spell in the pre-euro
ERM-2 currency grid, which they speculate could begin in the
first half of 2009.
That has hit the short-end of Poland's bond yield curve, to
the benefit of the long-end, but weaker than expected industrial
output data on Thursday tamed some rate hike expectations.
"Yesterday's data was bullish for bonds and this may still
be supporting them. On the other hand, German bonds suffered
after the rises on Wall Street," a fixed income trader in Warsaw
said.
In other trade, the Czech crown <EURCZK=> lagged the region,
trading a touch down at 24.031 to the euro.
Croatia's kuna <EURHRK=> edged 0.1 percent lower to 7.108
per euro. The Serbian dinar <EURRSD=> lost 0.4 percent to 76.57
versus the euro.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.031 24.019 -0.05% +9.31%
Polish zloty <EURPLN=> 3.324 3.337 +0.39% +7.68%
Hungarian forint <EURHUF=> 240.670 242.300 +0.67% +4.82%
Croatian kuna <EURHRK=> 7.108 7.102 -0.08% +2.98%
Romanian leu <EURRON=> 3.641 3.665 +0.65% -1.7%
Serbian dinar <EURRSD=> 76.567 76.287 -0.37% +2.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -17 basis points to -1bps over bmk*
5-yr T-bond CZ5YT=RR -17 basis points to -2bps over bmk*
10-yr T-bond CZ9YT=RR -12 basis points to +18bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -27 basis points to +241bps over bmk*
5-yr T-bond PL5YT=RR -17 basis points to +197bps over bmk*
10-yr T-bond PL10YT=RR -12 basis points to +165bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -20 basis points to +529bps over bmk*
5-yr T-bond HU5YT=RR -17 basis points to +493bps over bmk*
10-yr T-bond HU10YT=RR -17 basis points to +386bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1030 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham)
