* Region higher on stocks, dollar, better risk appetite
* Forint, crown hit new 2009 highs
* Market shrugs off poor Czech, Turkish data
(Updates throughout)
By Jason Hovet and Balazs Koranyi
PRAGUE/BUDAPEST, June 30 (Reuters) - Central Europe's
currencies rallied on Tuesday, despite mixed economic data from
the region, as improving economic sentiment on core markets
boosted appetite for riskier emerging market assets.
Hungary's forint <EURHUF=> led gainers with a six-month-high
after strong balance of payment figures while the Czech crown
<EURCZK=>, traditionally, a traditional safe haven in the
region, also hit its highest level this year.
"We are led by general risk appetite, with the dollar weak
and equity markets higher," a Stockholm-based central European
currency dealer said.
The forint surged over 1.5 percent a day after Parliament
approved crucial 2010 tax legislation and on
better-than-expected first quarter current account and May
producer prices data. []
"The current account figures and PPI numbers were both
better than expected, and they boosted the forint, but I think
this is mostly a technical rally supported by stop-loss orders,"
a dealer said.
"The next psychological level is 270 but looking at
technicals, it's 268.5"
The forint's continued firming also prompted rate setter
Peter Bihari to say that Hungary was on the brink of cutting
rates. []
Romania's markets, where the central bank cut interest rates
50 basis points as expected was little moved as the rate move
was already priced in.
Poland's zloty <EURPLN=>, the region's biggest currency,
also rallied and traders said it could be moving into a new
range on the longer term.
"I expect the zloty to move to even 4.20 in the long-term
since the problem with FX options seems to diminish," said
Krzysztof Wasilewski, dealer at Millennium bank in Warsaw."
Stock markets also supported the rallies with Warsaw
<> and Prague <> trading higher and Budapest <>
falling slightly after trading up for most of the day.
NOT ALL GOOD NEWS
Falling orders in the Czech Republic pushed May industrial
output down by more than 20 percent, and analysts said it
signalled a divide with the purchasing managers' index (PMI),
which has risen in the last four months. []
The IMF added that Austrian banks [], among the
most exposed to emerging Europe, and banks in Hungary
[] may need to increase capital buffers during the
downturn.
And Turkey said its economy shrunk by a record 13.8 percent
in the first quarter, worse than expectations. []
But some analysts warned that emerging Europe's rally, which
has boosted currencies, led by the crown, by as much as 14
percent and equity markets, led by Budapest and Warsaw, by more
than 40 percent since mid-February was losing steam.
Capital Economics, in a late report on Monday, said the
rally has gone largely beyond fundamentals and risk appetite was
set to wane as the pace of global economic recovery disappoints.
"A series of local factors continue to loom large over
financial markets in the region," the report said, mentioning
banking fragility and possible currency devaluation in Latvia,
whose spillover effects had unnerved markets earlier in June.
"All of these factors suggest that further falls in
financial markets are likely over the coming months."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.919 25.994 +0.29% +3.22%
Polish zloty <EURPLN=> 4.459 4.501 +0.94% -7.71%
Hungarian forint <EURHUF=> 271.69 276.08 +1.62% -3%
Croatian kuna <EURHRK=> 7.267 7.275 +0.11% +1.35%
Romanian leu <EURRON=> 4.203 4.208 +0.12% -4.49%
Serbian dinar <EURRSD=> 94.07 94.07 0% -4.88%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -37 basis points to 115bps over bmk*
4-yr T-bond CZ4YT=RR +16 basis points to +174bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +297bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -8 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR -7 basis points to +324bps over bmk*
10-yr T-bond PL10YT=RR -6 basis points to +288bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -28 basis points to +775bps over bmk*
5-yr T-bond HU5YT=RR -65 basis points to +707bps over bmk*
10-yr T-bond HU10YT=RR -52 basis points to +620bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1537 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus, writing by Jason Hovet and
Balazs Koranyi; Editing by Ron Askew)
