* Zloty dips on dovish cbank comments
* Hungary expected to hold rates, end tightening cycle
By Jason Hovet and Dagmara Leszkowicz
PRAGUE/WARSAW, Feb 21 (Reuters) - The zloty fell on Monday
after comments from Poland's central bank governor raised
concerns about the pace of monetary policy tightening, while the
forint was down ahead of Hungary's central bank rates decision.
Analysts expect Hungary to hold fire on interest rates after
three quarter percentage point rises since November brought the
base rate to 6 percent. []
Poland started tightening policy last month, raising the
main rate to 3.75 percent from a record low. Markets have raised
bets the Monetary Policy Council will follow that with another
rate hike at the council's March meeting. []
But on Monday, the central bank's head Marek Belka said it
should act with moderation as long as there is no wage pressure
and the January rate rise would not be followed by a "cascade"
of further hikes. []
The comments pushed the zloty off session highs.
"We're less confident now with a possible rate hike in March
(after Belka's comments), but we also bear in mind that his
comments are more ambiguous recently," said Rafal Benecki,
senior economist at ING bank in Warsaw.
The zloty <EURPLN=> fell some 0.2 percent from Friday's
close to 3.923 to the euro by 0928 GMT, while the forint
<EURHUF=> lost 0.4 percent.
Other currencies were little changed, with the Czech crown
<EURCZK=> edging 0.1 percent lower, touch off previous losses,
and the Romanian leu <EURRON=> almost unchanged to the euro.
The Polish bonds shrugged off Belka's comments and bonds'
yields remained flat.
Polish 9x12 forward rate agreements <PLNFRA=> still prices
in four more interest rate increases this year, each by a
quarter of percentage point.
EXTERNAL FACTORS WEIGH
A dip in central Europe's reference currency, the euro, and
falling risk appetite amid spreading anti-government protests in
Libya and the Middle East also added pressure on emerging
European currencies.
Concerns over euro zone peripheral Portugal's high budget
deficit also weighed on the market, dealer said.
"These negative factors are more important than positive
news from US companies, which had increased risk appetite on
Friday in the evening," said Piotr Bujak of Bank Zachodni WBK.
In Hungary, the bank will have its last meeting in its
current composition. By March the mandates of four of the
Council's seven rate setters will expire, and parliament is
expected to replace them with dovish economists backed by the
ruling Fidesz party. []
Twenty-six of 27 analysts in a Reuters poll forecast that
the bank will keep interest rates on hold.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.461 24.443 -0.07% +2.2%
Polish zloty <EURPLN=> 3.923 3.915 -0.2% +0.89%
Hungarian forint <EURHUF=> 270.67 269.56 -0.41% +2.7%
Croatian kuna <EURHRK=> 7.405 7.405 0% -0.34%
Romanian leu <EURRON=> 4.239 4.24 +0.02% -0.14%
Serbian dinar <EURRSD=> 103 103.1 +0.1% +2.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +7 basis points to 41bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +89bps over bmk*
10-yr T-bond CZ9YT=RR +3 basis points to +92bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -5 basis points to +370bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +344bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +305bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1028 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 Toby Chopra)
