* Currencies, stocks fall sharply
* Poland holds rates steady at 3.5 percent
(Recast with new prices, comments)
By Marius Zaharia and Sandor Peto
BUCHAREST/BUDAPEST, Oct 28 (Reuters) - Central European
currencies fell to multi-month lows on Wednesday and bond yields
rose as investors focused on the region's fiscal and political
risks amid new doubts over the global economic recovery.
Poland's central bank kept its main interest rate on hold as
expected, but other central banks in the region, concerned by
recession, are expected to cut their interest rates further.
As the region's assets remain exposed to global sentiment
changes, government bond yields rose and stocks fell like in
other emerging markets.[]
"Profit-taking, risk aversion, sentiment change, correction?
Call it as you like, the vulnerability of the CEE currencies is
obviously unchanged, not to mention rates...," one
Budapest-based trader said.
The retreat may be more lasting and go deeper this time than
similar falls in the past months, some market watchers said.
"We today -- or within the last couple of days -- have
broken the 100 days moving averages on the zloty, the forint,
the crown, the lei, the lira and the rand," said Lars
Christensen, analysts at Danske Bank.
He said Danske's scorecards for the units, which track risk
indicators, turned even gloomier on Wednesday, including the
zloty which is often used as a proxy currency for the region
even though Poland has escaped recession unlike other states.
The zloty <EURPLN=> shed 1.1 percent against the euro to
4.261, after the Polish central bank kept rates on hold at an
all-time low at 3.5 percent.[]
RATES, POLITICS WEIGH
The forint <EURHUF=> led losses, hitting a six-week low per
euro at 274.50, before regaining some ground. It was bid at
273.26 at 1447 GMT, still weaker by 1.45 percent from Tuesday.
Hungarian bond yields continued to rise. But long-dated
yields corrected slightly downwards from morning levels, and the
spread between 10-year yields at 7.43 percent and 3-year yields
at 7.30 narrowed from 34 basis points a day ago.
Hungary's central bank rate at 7.0 percent is well above the
Polish and Czech levels, but the bank is expected to cut rates
further as the country struggles with rising unemployment, while
its high external debt keeps it vulnerable to market shocks.
General Electric said on Wednesday that it would cut nearly
2,700 jobs in Hungary in the next two years.[]
The yield curve, which was below 7 percent days ago, may
reach 8 percent soon, though the prospect of rate cuts can push
it downwards again if the global mood improves, traders said.
The leu <EURRON=>, pressured by uncertainty following the
collapse of Romania's government earlier this month, traded at
seven-month lows, but the daily move was less spectacular.
It fell 0.3 percent from the previous close, with investors
fearing a central bank intervention close to 4.3 per euro.
Romania, like Hungary, relies on funding from the
International Monetary Fund and markets fear Romania's political
turmoil will hurt its chances of keeping IMF cash flowing.
An IMF mission started its second review of Romania's 20
billion euro bailout as parliament holds hearings for ministers
proposed by Prime Minister designate Lucian Croitoru, who is
widely expected to fail to get political backing.[]
Meanwhile, neighbouring Moldova agreed to a $590 million
stand-by loan from the IMF.[]
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.428 26.201 -0.86% +1.23%
Polish zloty <EURPLN=> 4.261 4.216 -1.06% -3.43%
Hungarian forint <EURHUF=> 273.26 269.29 -1.45% -3.55%
Croatian kuna <EURHRK=> 7.222 7.218 -0.06% +1.98%
Romanian leu <EURRON=> 4.302 4.29 -0.28% -6.69%
Serbian dinar <EURRSD=> 93.18 93.113 -0.07% -3.97%
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +30 basis points to +553bps over bmk*
5-yr T-bond HU5YT=RR +25 basis points to +491bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +416bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1547 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; writing by Marius Zaharia/Sandor
Peto; editing by Patrick Graham and Andy Bruce)
