* Risk appetite falls, forint leads FX down
* Fitch financing reports adds to pressure
* Regional GDP data due out on Friday
(Updates prices, adds c.bankers)
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,
and 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
early before paring losses, although renewed concern the global
economic recovery remained distant hit market sentiment.
Investors awaited first quarter gross domestic product data
in the region on Friday, and while data on Thursday showed a
slowing decline in Czech retail sales in March, analysts said it
still showed a rough drop for the export-led economy.
[]
In Hungary, among the worst off economies in the region and
one of three European Union members to get external aid in the
downturn, the forint fell 1.7 percent from Wednesday's domestic
close, bidding at 288.4 to the euro by 1050 GMT.
The currency rose last week to a nearly four-month high, up
more than 13 percent from a March 6 low of 317.45 to the euro.
But it has reversed sharply this week with a 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 Bank wrote in
recommendation to sell the Hungarian unit.
Hungary's central bank Deputy Governor Julia Kiraly said on
Thursday that despite higher interest rates than regional peers,
radical cuts were not likely in order to protect the currency.
[]
Hungarian bond yields also 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 Budapest fixed income dealer said.
In Poland, the zloty <EURPLN=> dropped 1 percent to 4.473 to
the euro, falling more as ambitious euro entry hopes fade.
Central banker Jan Czekaj was the latest official on
Thursday to cast doubt on the government's 2012 euro adoption
timetable, saying entry to proving guide ERM-2 was not likely
this year. []
The Czech crown <EURCZK=> touched a 3-week low on Thursday,
and Romania's leu <EURRON=> fell 0.3 percent to 4.187 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=> 27.029 26.839 -0.7% -1.02%
Polish zloty <EURPLN=> 4.49 4.446 -0.98% -8.35%
Hungarian forint <EURHUF=> 288.38 283.44 -1.71% -8.61%
Croatian kuna <EURHRK=> 7.343 7.348 +0.07% +0.3%
Romanian leu <EURRON=> 4.187 4.175 -0.29% -4.12%
Serbian dinar <EURRSD=> 94.85 94.845 -0.01% -5.66%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to 171bps over bmk*
4-yr T-bond CZ4YT=RR +7 basis points to +205bps over bmk*
8-yr T-bond CZ8YT=RR +6 basis points to +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +32 basis points to +904bps over bmk*
5-yr T-bond HU5YT=RR +35 basis points to +846bps over bmk*
10-yr T-bond HU10YT=RR +35 basis points to +725bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1251 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/Andy Bruce/Victoria Main)
