* Forint at 2-month high on S&P outlook revision
* Leu stable as leftists' comments support unit
* Zloty continues gains on govt deal with Eureko
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Oct 5 (Reuters) - Hungary's forint rose to a
two-month high on Monday in a further positive reaction to a
ratings outlook lift by Standard & Poor's, while Romanian leu
steadied after slipping six-month lows on political tensions.
The moves highlighted an apparent end to months of a mostly
uniform region-wide rally and underscored how factors ranging
from politics, monetary policy and corporate news may cause
divergence in assets as the fragile recovery takes root.
The forint <EURHUF=> got a boost on Friday when S&P revised
Hungary's sovereign rating outlook to stable from negative,
saying the government's measures will contain a deterioration in
finances despite a deep recession. []
"Sentiment in the region is a bit more positive, we see a
continuation of gains posted after Friday's upgrade (S&P outlook
revision)," a Budapest-based currency dealer said. "There may be
room for some further gains this week, I can imagine the forint
moving between 265-270 versus the euro."
Hungary's bonds were steady, while the currency inched up
0.2 percent to 267.25 after edging to the strong side of 267
earlier for the first time since August.
In Romania, which like Hungary has been backed by external
aid, the leu <EURRON=> was stable at 4.267 per euro after a
pledge from the country's Social-Democrats (PSD) on Saturday to
support the minority government in meeting conditions for the
International Monetary Fund.
The Social Democrats quit the coalition government on
Thursday in protest at the sacking of a minister before
November's presidential election.
"This has calmed the market, it is even possible the leu
will firm," one Bucharest-based dealer said, adding that
regional sentiment will decide whether the leu remains stable or
firms later in the day.
Some dealers say the central bank may take up interventions
again on the FX market when the leu falls significantly.
"We continue to believe that the NBR will step in around
4.26-4.27," analysts at UniCredit wrote in a note.
DONE DEAL
Elsewhere, the Polish zloty <EURPLN=> rose 0.3 percent to
further gain on a government deal with Dutch company Eureko on
Friday to regain full control of the region's biggest insurer,
PZU, which will pay a special dividend of 12.75 billion zlotys.
[]
"The zloty is not under PZU pressure anymore and this may
boost demand for the Polish currency," said Marcin Bilbin, a
dealer at Pekao bank in Warsaw. "We've got facts now, so we can
see some strengthening further."
Concerns that Eureko would convert the dividend payout into
euros, flooding the market with the Polish currency, had helped
to drive the zloty <EURPLN=> to its lowest level in two months.
The Czech crown <EURCZK=> underperformed with a 0.1 percent
dip on rising expectations the central bank may cut interest
rates once more.
Vice-Governor Miroslav Singer said in a presentation
released on Monday that further easing cannot be ruled out if
price pressures from both home and abroad fall further.
[]
Singer and central bank chief Zdenek Tuma were the only two
dissenters in the central bank's 5-2 vote to keep interest rates
on hold last month, a signal for markets that its easing cycle
was not over, dealers said. []
"We can expect some easing of the crown after the dovish
comments from the central bank," said one dealer. "It looks like
25.60 to the euro will be the next barrier."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.431 25.414 -0.07% +5.2%
Polish zloty <EURPLN=> 4.216 4.23 +0.33% -2.4%
Hungarian forint <EURHUF=> 267.25 267.84 +0.22% -1.38%
Croatian kuna <EURHRK=> 7.258 7.258 0% +1.47%
Romanian leu <EURRON=> 4.267 4.268 +0.02% -5.92%
Serbian dinar <EURRSD=> 93.05 92.977 -0.08% -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -15 basis points to 150bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +181bps over bmk*
10-yr T-bond CZ10YT=RR -4 basis points to +174bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +395bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +346bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +312bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +558bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +529bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +482bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1142 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara
Leszkowicz; Editing by Toby Chopra)
