* Risk appetite lifts FX, outweighing Czech industry fall
* Polish bonds steady after previous gains
* Romania cbank cuts 50 bps as expected
(Updates with Romania cbank)
By Jason Hovet
PRAGUE, June 30 (Reuters) - The Hungarian forint rose on
Tuesday after much better than expected balance of payments data
and the Czech crown joined it at its highest level this year
despite data showing the economic crunch had not abated there.
Dealers said improved economic sentiment in the euro zone
had boosted risk appetite, driving more orders for assets in a
region that has struggled to shake off the global downturn.
The forint <EURHUF=> jumped 1.3 percent to bid at 272.4 per
euro by 1106 GMT, its strongest since Jan. 8. The Czech crown
<EURCZK=> hit its strongest since mid-December, before easing to
bid at 25.892, up 0.4 percent from Monday's domestic close.
Central European stocks, also boosted by market hopes that
Turkey was nearing a credit deal with the International Monetary
Fund, jumped more than 1 percent. []
"We are led by general risk appetite, with the dollar weak
and equity markets higher," a Stockholm-based central European
currency dealer said.
The Polish zloty <EURPLN=> followed with a 1 percent gain,
while bonds, after gaining in the previous two sessions on
smaller supply concerns, held steady before a Wednesday auction.
In Romania, the central bank cut interest rates 50 basis
points as expected and the leu <EURRON=> was little moved as
markets had priced the change in, dealers said.
The bank also cut its reserve requirements for banks in a
bid to lift local lending and help Romania's economy out of
recession. []
DIVIDE
Central Europe's export-dependent economies have been among
the hardest hit in the global downturn due to a collapse in
orders for the cars and electronics the region produces for the
euro zone, and analysts say a rebound in German consumption, in
particular, is crucial to a recovery.
A drop in Hungarian imports in the first quarter cut the
current account gap below analysts' estimates. []
Falling orders in the Czech Republic pushed May industrial
output by more than 20 percent, and analysts said it signalled a
divide with the purchasing managers' index (PMI), which has
risen in the last four months. []
The Czechs, Poles and Hungarians will release June PMI data
on Wednesday.
Strategists say an emerging Europe rally that has boosted
currencies, led by the crown, by as much as 14 percent and
equity markets, led by Budapest and Warsaw, by more than 40
percent since mid-February is losing steam.
Capital Economics, in a late report on Monday, said the
rally has gone largely beyond fundamentals and risk appetite was
set to wane as the pace of global economic recovery disappoints.
"A series of local factors continue to loom large over
financial markets in the region," the report said, mentioning
banking fragility and possible currency devaluation in Latvia,
whose spillover effects had unnerved markets earlier in June.
"All of these factors suggest that further falls in
financial markets are likely over the coming months."
The IMF said on Tuesday Austrian banks, among the most
exposed to emerging Europe, may need to increase capital buffers
during the downturn. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.892 25.994 +0.39% +3.33%
Polish zloty <EURPLN=> 4.457 4.501 +0.99% -7.67%
Hungarian forint <EURHUF=> 272.44 276.08 +1.34% -3.26%
Croatian kuna <EURHRK=> 7.269 7.275 +0.08% +1.32%
Romanian leu <EURRON=> 4.206 4.208 +0.05% -4.56%
Serbian dinar <EURRSD=> 93.436 94.07 +0.68% -4.23%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 148bps over bmk*
4-yr T-bond CZ4YT=RR +11 basis points to +168bps over bmk*
8-yr T-bond CZ8YT=RR +13 basis points to +299bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +328bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +291bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1308 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 Ruth Pitchford/Victoria Main)
