* FX cut some losses, still weaker on Chinese news
* Romania, Czech seen posting economic growth this year
* Polish bonds stable ahead of auction, demand backs zloty
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Jan 20 (Reuters) - Emerging Europe's currencies were
weaker but off early lows on Wednesday, tracking a falling euro
after news on Chinese lending trimmed risk appetite, but the
region's improving fundamentals were seen providing support.
Central Europe's export-reliant economies suffered badly in
2009 but expectations of a modest rebound have helped regional
markets to rise since the start of the year.
Reinforcing that message, Czech central bank vice governor
Miroslav Singer told a conference in Vienna on Wednesday he
expected Czech growth of around 2 percent this year.
Romania's Deputy Governor Cristian Popa said at the same
conference his country's economy would grow at 1.5 percent this
year, compared with an expected contraction of around 7 percent
in 2009. []
But traders' immediate focus was on a weakening of the euro
after Chinese official media and banking sources said banking
authorities in Beijing had instructed some major banks to curb
their lending over the rest of this month [].
"(The euro) seems to be more sensitive to economic factors
(e.g to German ZEW index and to last night's Chinese news),"
analysts at Commerzbank wrote in a morning note.
Other factors that could affect market players' willingness
to invest in emerging Europe's assets include Greece's deficit
woes and political uncertainty in Ukraine.
Hungary's forint <EURHUF=> was down 0.4 percent and the
Czech crown <EURCZK> was also a touch down against the euro.
Poland's zloty <EURPLN=> was 0.2 percent weaker, trimming
some of its morning losses after dealers said Poland's currency
had found additional support from good demand at today's bonds
auction.
Romania's leu <EURRON=> has outperformed regional peers,
gaining about 3 percent since the start of the year amid hopes
for a swift approval of a tight 2010 budget that is key to
unlocking an IMF-led aid package frozen by political deadlock.
Markets are now watching for comments from International
Monetary Fund officials as the Fund starts a one-week mission in
Bucharest to review the 20 billion euro aid deal.
RATES UP?
Dealers said the Czech crown may find support from recent
comments by central bank governor Zdenek Tuma who said interest
rates have likely hit bottom.
"That increases the likelihood that the Czech central bank
will start the rate rise cycle significantly before the ECB,
which in turn is an argument in favour of a stronger crown,"
Commerzbank wrote.
Czech borrowing costs are at a record low, with the main two
week repo rate at 1 percent. Most economists say the easing
cycle is over and expect rates to be stable for several months.
In Poland, analysts expect the central bank's Monetary
Policy Council (MPC) to raise interest rates from an all-time
low of 3.5 percent only in the second half of 2010.
New MPC member Jerzy Hausner told Reuters on Wednesday: "I
see no reasons for any rapid change in monetary policy."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.86 25.833 -0.1% +1.77%
Polish zloty <EURPLN=> 4.021 4.014 -0.17% +2.06%
Hungarian forint <EURHUF=> 268.45 267.49 -0.36% +0.71%
Croatian kuna <EURHRK=> 7.291 7.269 -0.3% +0.25%
Romanian leu <EURRON=> 4.118 4.113 -0.12% +2.9%
Serbian dinar <EURRSD=> 97.2 96.93 -0.28% -1.36%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +1 basis points to 72bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +127bps over bmk*
10-yr T-bond CZ10YT=RR +2 basis points to +117bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +380bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +320bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +284bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1048 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
Editing by Andy Bruce)
