(Adds details, quotes, updates prices)
By Marius Zaharia
BUCHAREST, Nov 7 (Reuters) - The Czech crown led losses in
central Europe against the euro on Friday after a steep interest
rate cut by the Czech central bank on Thursday heightened
expectations of an economic slowdown in the region.
The Polish zloty and the Hungarian forint gave back early
gains, dragged down by a widening in crown losses and a likely
rate cut outlook for Warsaw.
Central European currencies were involved in roller-coaster
trade this week, with the crown and the zloty losing more than 2
percent on Thursday because of the Czech rate cut and comments
from the Polish central bank governor, who said there were more
reasons to start an easing cycle.
"The crown will remain under significant pressure until the
end of the year due to aggressive steps of the Czech central
bank," CSOB bank said in a research note. "We don't rule out the
crown will go up again over 26 per euro in the near future."
Expectations for an economic slowdown, stemming from the
global credit crunch and fears of recession in the euro zone,
started to loom in Poland as well.
"We believe signs of a slowdown will intensify in upcoming
months. An important argument also is the tightening of credit
possibilities, which could limit economic activity in Poland,"
BRE bank said in a note to clients.
At around 1050 GMT, the Czech crown <EURCZK=> was more than
one percent weaker to the euro, trading at 25.207.
The Polish zloty <EURPLN=> and the Hungarian forint
<EURHUF=> lost 0.2 percent each to trade at 3.637 per euro and
263.8 per euro, respectively. The Romanian leu <EURRON=> was
down 0.16 percent to 3.725 to the euro.
On Friday, investors were on the lookout for U.S. jobs data.
Economists expect 200,000 U.S. job losses in October.
The most battered currency in the region was the dinar in
Serbia, where the central bank has intervened several times this
week to combat concerns about the country's external financing,
which became harder to stomach for investors.
Central banks in the euro zone, Britain and Switzerland also
made deep cuts in their key rates in response to worsening
growth outlooks.
Elsewhere in the region, Hungary and Serbia have raised
interest rates in the past month to defend currencies, while
Romania is seen holding fire on rates for the time being,
because of uncertainty on government policies after the Nov. 30
election.
Early on Friday, Hungary announced its foreign exchange
reserves went up to 17.804 billion euros in October from 17.409
billion euros in September. The Czech forex reserves edged up to
26.65 billion euros at the end of last month.
The Polish central bank is also due to release foreign
exchange reserves data.
In bond markets, trading remained sluggish with yields
rising slightly, and traders said range trading was likely to
continue.
"Yields rose but there is no big pressure, bids are
disappearing, and when yields go into the opposite direction,
offers disappear, with the market staying in a 70-80 basis point
range," one trader in Hungary said.
The Czech central said on Friday it was looking for measures
to boos bond market.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 25.207 24.943 -1.06% +4.87%
Polish zloty <EURPLN=> 3.637 3.631 -0.17% -1.01%
Hungarian forint <EURHUF=> 263.8 263.27 -0.2% -4.33%
Croatian kuna <EURHRK=> 7.143 7.135 -0.11% +2.5%
Romanian leu <EURRON=> 3.725 3.719 -0.16% -4.04%
Serbian dinar <EURRSD=> 86.75 87.157 +0.47% -10.14%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +3 basis points to 132bps over bmk*
5-yr T-bond CZ5YT=RR -2 basis points to +143bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +89bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +396bps over bmk*
5-yr T-bond PL5YT=RR +10 basis points to +335bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +261bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +35 basis points to +964bps over bmk*
5-yr T-bond HU5YT=RR -14 basis points to +917bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +541bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1246 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Andy Bruce)
