* Budget details key for HUF, but volatility may continue
* Finmin's comments on accelerating CPI could back zloty
* Closing PLN/HUF positions support forint
(Updates throughout)
By Marius Zaharia and Dagmara Leszkowicz
BUCHAREST/WARSAW, Oct 29 (Reuters) - Central Europe's
currencies were mostly in positive territory on Friday, with
Hungary's forint leading gains ahead of detailed budget plans
due from the government this weekend.
The Hungarian unit was additionally supported by regional
cross plays on zloty/forint, market players said.
The Polish zloty <EURPLN=> reversed its intraday losses and
some dealers said the unit might by buoyed by comments by the
deputy finance minister suggesting inflation is accelerating,
which could prompt the central bank to raise rates soon.
"It looks like the zloty could find additional support in
comments about inflation," said Jakub Wiraszka, dealer at BRE
bank in Warsaw, noting that the currency managed to rebound from
recent losses beforehand, when it had briefly touched the key
psychological level of 4.00 against the euro.
Deputy Finance Minister Ludwik Kotecki said Polish inflation
is likely to accelerate further from 2.5 percent reported in
September, mainly thanks to food prices. []
Earlier in the day the central bank's inflation projection
showed the 10-strong Monetary Policy Council was surprisingly
close to raising rates by a more aggressive half-point than the
moderate 25 basis points expected by economists. []
The the council is widely expected to raise rates but the
market is split over the timing of hikes. The finance ministry's
inflation forecast, due next week, could bring more clarity,
market players said.
By 1344 GMT the forint <EURPHUF=> was up 0.4 percent to the
euro, while the Czech crown <EURCZK=> and Polish zloty <EURPLN=>
had each added 0.1 percent against the single currency.
Romania's leu <EURRON=> was flat on the day.
Dealers said the forint was also supported by closing
positions on regional currency plays.
"Long zloty-forint positions have been closed," one
Budapest-based fixed income trader said.
"These positions were opened when Hungary looked set to
leave the deficit course (required by the European Union).
(Investors) still expect the zloty to outperform (in the
region), but the forint is seen underperforming less."
Hungarian government bond yields dropped some 5 basis points
across the curve, extending Thursday's gains, on the back of the
stronger forint.
HUNGARY'S BUDGET
Investors are awaiting full details of Hungary's budget
plans for next year, after some of the budget-related measures
caused large swings in asset prices in recent months.
"A strict budget including structural reforms, not only
extra taxes, could maintain the current positive sentiment.
Without that the forint can retreat (next week)," said one
Budapest-based dealer.
Hungary's Fidesz government is expected to tell parliament
before a Sunday deadline how it plans to cut its budget deficit
to below 3 percent of gross domestic product. []
Its September pledge to cut the deficit helped the forint
firm by about 5 percent versus the euro, but later announcements
of unorthodox measures such as special taxes for parts of the
corporate sector and the suspension of payments to private
pension funds have spooked investors again.
The government's spokesman told Reuters the country's
Economy Minister Gyorgy Matolcsy would hold a news conference
about next year's budget at 0900 GMT on Saturday.
[]
Elsewhere, Romania's leu hovered above its 200-day moving
average at 4.26 per euro, with little strength to break below
that even though investors were relieved to see the government
survive a no-confidence vote earlier this week.
Markets are watching for any comments from an IMF mission
which is in Bucharest until Nov. 1 to review a 20 billion euro
aid deal.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.602 24.623 +0.09% +6.98%
Polish zloty <EURPLN=> 3.97 3.973 +0.08% +3.38%
Hungarian forint <EURHUF=> 271.98 273.07 +0.4% -0.6%
Croatian kuna <EURHRK=> 7.345 7.336 -0.12% -0.49%
Romanian leu <EURRON=> 4.267 4.266 -0.02% -0.69%
Serbian dinar <EURRSD=> 107.32 107.47 +0.14% -10.66%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -2 basis points to 78bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +91bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +108bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +372bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +346bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +312bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +540bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +510bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +446bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1544 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Marius Zaharia; editing by Hugh Lawson and
Catherine Evans)
