* Forint, zloty pull back from highs
* Stocks snap winning streak
* Hungary cuts back on 10-year bond auction
(Updates prices, quotes)
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, May 21 (Reuters) - Hungary's forint fell in
late trade on Thursday and the Polish zloty was also weaker on
the day after a drop in major stock markets put a sharp rally in
central European currencies on pause.
The region's currencies had jumped this week on the back of
equity gains and hopes the global downturn is at a bottom.
But with investors booking profits and less demand for the
region on Thursday, Hungary cut a 10-year bond auction, a slight
stumble as it continues in restarted debt sales after a nearly
half-year pause. []
Bond yields ticked higher from Wednesday on the longer end,
while the forint <EURHUF=> dropped 1.4 percent from Wednesday's
domestic close to 279.65 by 1441 GMT.
The Polish zloty <EURPLN=> was down 1.1 percent after having
lost almost 1.4 percent earlier.
"The whole region is hit by short-selling. After the recent
optimism people start to realise that the (global) crisis is not
yet over, the dollar is firming again and equities are going
down," one Budapest-based dealer said.
The World Bank said on Thursday the 10 ex-communist European
Union economies could contract by about 3 percent in 2009.
[]
The zloty and forint had led gains this week with a 3-4
percent rise on higher appetite for emerging European assets,
and dealers had warned the rise was getting ahead of itself.
Major European share indexes ended a five-day winning streak
and central European bourses 1-3 percent.
"Currencies in the region were just tracking stocks and
those fell quite significantly ... But for now I don't see a
sharp correction," said Lukasz Wojtkowiak, FX analyst at
Millennium.
PAUSING FOR BREATH
The zloty has jumped the most among its peers from lows in
February, but still trades 23 percent down from the end of June
last year, while the forint is off 15 percent in that time.
The fragile forint is expected to be a strong factor forcing
Hungary's central bank to hold fire on interest rates at a
policy meeting on Monday. []
But dealers said currencies could still draw support from a
weakening dollar, suggesting investors may return to risk in the
near term and help central Europe, which generally gains when
risk sentiment rises. []
Yields fell at a Romanian bond auction on Thursday of 639.2
million lei ($212 million) in three-year bonds, with an average
yield at 11.05 percent. []
Romania's leu <EURRON=> as well as the Czech crown <EURCZK=>
fell around 0.4 percent to the euro. Moody's ratings agency cut
its outlook on the Czech banking system to negative late on
Wednesday, but dealers said the move should have limited impact.
[]
Central Europe has come under heavy strain in the global
downturn, with foreign orders dropping sharply and unemployment
growing, which analysts say will pressure banks.
Foreign banks operating in Hungary and Romania, two European
Union members that have taken external aid, have pledged to
support their local units in the financial crisis.
[] []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.665 26.551 -0.43% +0.33%
Polish zloty <EURPLN=> 4.389 4.342 -1.07% -6.24%
Hungarian forint <EURHUF=> 279.65 275.77 -1.39% -5.76%
Croatian kuna <EURHRK=> 7.31 7.335 +0.34% +0.75%
Romanian leu <EURRON=> 4.165 4.148 -0.41% -3.62%
Serbian dinar <EURRSD=> 94.398 94.252 -0.15% -5.21%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +5 basis points to 142bps over bmk*
4-yr T-bond CZ4YT=RR +6 basis points to +190bps over bmk*
8-yr T-bond CZ8YT=RR +20 basis points to +276bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +430bps over bmk*
5-yr T-bond PL5YT=RR +9 basis points to +336bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +286bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +9 basis points to +854bps over bmk*
5-yr T-bond HU5YT=RR +14 basis points to +782bps over bmk*
10-yr T-bond HU10YT=RR +17 basis points to +659bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1642 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 and
Dagmara Leszkowicz; Editing by Ruth Pitchford)
