* Forint leads CEE FX losses as risk appetite falls
* Bonds weaker, Fitch report adds pressure
* Regional GDP data due out on Friday
(Adds details, Fitch, bonds)
By Jason Hovet
PRAGUE, May 14 (Reuters) - Investors cut risk on Thursday to
push the Hungarian forint to a two-week low and bond yields up,
while a Fitch report placing Hungary among the most vulnerable
to external financing risks added to pressure.
Emerging European stock markets fell more than 1 percent
before paring losses later in the session as renewed concern the
global economic recovery remained distant hit market sentiment.
Investors also awaited first quarter gross domestic product
data in the region on Friday.
The decline in Czech retail sales slowed in March, data
showed Thursday, but analysts said it still pointed to a rough
drop for the export-led economy, seen as better placed than
others in the region. []
In Hungary, where the economy is expected to contract more
than 6 percent this year and one of three European Union members
to get external aid in the downturn, the forint fell 1.5 percent
to bid at 287.6 to the euro by 0900 GMT.
Danske Bank recommended buying the euro against the
Hungarian forint after the shift in risk sentiment following
weak U.S. retail sales on Wednesday, which broke a string of
more upbeat reports on the economy.
"Given the worsening of risk sentiment in the last two days,
we think the markets are likely to test the forint once again
sending EUR/HUF back above 300," Danske wrote in a note.
The forint had strengthened to an almost four-month high of
280 to the euro last week, gaining more than 13 percent from a
March 6 low of 317.45.
Hungarian bond yields climbed around 30 basis points on
Thursday, and dealers said a Fitch report on central Europe's
external financing risk piled onto the harsher sentiment.
RISKS STILL THERE
Fitch Ratings said on Thursday countries like Hungary, which
has a large current account deficit and foreign currency debt,
were among most exposed to external funding risk. []
"The market is just trying to pull itself together, in the
morning bids were all over the place, there was some aggressive
selling interest," a fixed income dealer said.
In Poland, the zloty <EURPLN=> dropped 0.6 percent to bid at
4.473 to the euro, while the Czech crown <EURCZK=> touched a
3-week low on Thursday and slipped to the weak side of 27 to the
euro.
Romania's leu <EURRON=> fell 0.2 percent to 4.184 per euro.
Currencies have been slowly slipping back from highs hit
during the last month, and the crown, forint and zloty have shed
around 1 to 2.5 percent this month.
The region's currencies have reversed sharply from record
highs last summer as capital flows stall and businesses suffer
under lower western demand for their cars, auto parts,
electronics and other goods.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.958 26.839 -0.44% -0.76%
Polish zloty <EURPLN=> 4.473 4.446 -0.6% -8%
Hungarian forint <EURHUF=> 287.6 283.44 -1.45% -8.36%
Croatian kuna <EURHRK=> 7.343 7.348 +0.07% +0.3%
Romanian leu <EURRON=> 4.184 4.175 -0.22% -4.05%
Serbian dinar <EURRSD=> 94.93 94.845 -0.09% -5.74%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 163bps over bmk*
4-yr T-bond CZ4YT=RR +6 basis points to +205bps over bmk*
8-yr T-bond CZ8YT=RR -6 basis points to +272bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +29 basis points to +901bps over bmk*
5-yr T-bond HU5YT=RR +30 basis points to +840bps over bmk*
10-yr T-bond HU10YT=RR +31 basis points to +721bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1101 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 and Andy Bruce)
