* CEE swept up in Dubai risk, but strategists see calm ahead
* Hungary bond yields rise, budget concerns up
* For Dubai stories see []
(Adds bonds, quotes, details)
By Jason Hovet
PRAGUE, Nov 27 (Reuters) - The Hungarian forint and Polish
zloty led central European currencies lower on Friday as
investors, rattled by debt fears in Dubai, retreated from risk
in emerging markets.
Worries that a Dubai debt default could spell trouble for
banks and markets beyond the emirate sent investors to safer
ground, knocking emerging European assets and highlighting debt
problems that countries like Ukraine or Hungary still face.
"There is a strong flight to quality which means the U.S.
dollar appreciates and hits all currencies in the region," said
Simon Quijano-Evans, emerging economist with Cheuvreux.
"But it also highlights the weaker fundamental stories in
the region, which include Hungary, Ukraine and Latvia...
particularly those that are exposed to high debt levels."
On Friday, the forint <EURHUF=> lost 0.3 percent to bid at
272.75 to the euro by 1012 GMT, but recouped some early losses
after hitting an almost 3-week low.
The zloty <EURPLN=>, the region's biggest economy and the
only one not to fall into recession this year, set the pace with
a 0.7 percent drop to 4.18 to the euro and Polish bond yields
rose 3-7 basis points along the curve.
The Czech crown <EURCZK=>, after testing a more than 3-week
low, bid around 26.34 to the euro. Dealers said moves had been
hit also by low liquidity as U.S. markets closed for holiday.
Bourses were mixed, with Warsaw <> down 1.6 percent.
In Romania, the leu <EURRON=> was steady at 4.28 to the
euro, but off a 7-week high hit this week after the first round
of presidential polls. []
RISKS REMAIN
Concerns have grown that Hungary, recipient of a $25 billion
International Monetary Fund-led aid package last year, may
overshoot its budget targets next year, which has contributed to
a widening spread between 3- and 10-year bonds in recent weeks.
Hungarian bond yields rose by 20-25 basis points on Friday.
Mihaly Varga, former finance minister and a top economic
advisor in Fidesz party that is expected to win elections next
year, told Reuters this week that Hungary's budget deficit as a
percent of gross domestic product could be almost double the
target set with the IMF. []
Central Europe has seen more volatility in the past months,
hit often by jitters from countries outside the immediate
region. Concerns over Ukraine's debt situation first weakened
central European currencies and banks last week. []
But strategists have forecast firmer currencies over the
next year [], saying the region is past the worst
of the economic crisis, although recovery will still be sluggish
compared to bumper growth in recent years.
"I think it (Dubai) will not have a long-end effect and the
situation is likely to stabilise as it has happened in a country
with big commodities' supplies," said Beat Siegenthaler, chief
strategist at TD securities in London.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.34 26.301 -0.15% +1.57%
Polish zloty <EURPLN=> 4.18 4.149 -0.74% -1.56%
Hungarian forint <EURHUF=> 272.75 271.83 -0.34% -3.37%
Croatian kuna <EURHRK=> 7.315 7.304 -0.15% +0.68%
Romanian leu <EURRON=> 4.281 4.285 +0.09% -6.23%
Serbian dinar <EURRSD=> 94.75 94.64 -0.12% -5.56%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -8 basis points to 100bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +118bps over bmk*
10-yr T-bond CZ10YT=RR -6 basis points to +102bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +8 basis points to +371bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +345bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +23 basis points to +562bps over bmk*
5-yr T-bond HU5YT=RR +23 basis points to +515bps over bmk*
10-yr T-bond HU10YT=RR +23 basis points to +453bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1114 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaux; writing by Jason Hovet; editing
by Patrick Graham)
((prague.newsroom@thomsonreuters.com; Reuters Messaging:
jason.hovet.reuters.com@reuters.net; +420-224 190 476))
