PRAGUE, Oct 21 (Reuters) - Central European currencies
mostly firmed on Wednesday to extend a rally from the past week,
with the Hungarian forint briefly touching its highest level
this year in early trade.
The forint <EURHUF=> led gains with a 0.8 percent rise to
263.3 to the euro by 0744 GMT, profiting mainly from dollar
weakness which also helped the Polish zloty <EURPLN=> to keep
pace with a 0.5 pecent rise.
The Czech crown <EURCZK=> was 0.2 percent stronger than at
the European close on Tuesday, while the Romanian leu <EURRON=>
lagged on persistent political concerns.
Dealers said markets were mostly ignoring local factors that
point to interest rate cuts in Hungary, possible looser monetary
policy in the Czech Republic and widening budget deficits in
central Europe.
However, recent stock market gains and a weaker dollar have
lent support.
"The market already seems to be relatively long on eastern
Europe," said Ulrich Leuchtmann, head of foreign exchange
research at Commerzbank in Frankfurt.
"Given what we've seen in eastern Europe as a relative
performance this (regional firming) makes some sense," he said,
adding though the moves looked to be overdone a bit.
Central Europe has been one of the hardest hit emerging
regions in the economic downturn. Its markets have rebounded
since March but at a slower pace than other developing
countries.
Currencies have gained in the past week, led by more than 1
percent gains for the zloty and forint, with the latter on
expectations the central bank will moderate interest rate cuts
going forward.
The forint <EURHUF=> traded below 263 earlier although
dealers said markets may have only been testing liquidity.
"There were some strong bids at that level and we are back
to where we opened, roughly," a dealer in Budapest said. "Under
normal circumstances, the range now is 264 to 267."
The central bank cut rates to a more than three-year low of
7 percent on Monday. []
Diminished rate cut expectations have also lifted longer
dated bonds, and the spread between 3- and 10-year yields has
narrowed to around 15 basis points from about 60 in two weeks.
In Romania, the leu <EURRON=> was stuck at 4.29, with
investor concerns over efforts to form a new government tempered
by prospects of a central bank intervention if the unit weakened
past 4.30 to the euro.
Romanian opposition parties on Tuesday refused to back
respected central banker Lucian Croitoru in his bid to become
prime minister, extending a political deadlock that threatens to
damage Bucharest's access to IMF aid. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.778 25.833 +0.21% +3.78%
Polish zloty <EURPLN=> 4.153 4.175 +0.53% -0.92%
Hungarian forint <EURHUF=> 263.3 265.35 +0.78% +0.09%
Croatian kuna <EURHRK=> 7.215 7.215 0% +2.08%
Romanian leu <EURRON=> 4.29 4.291 +0.02% -6.42%
Serbian dinar <EURRSD=> 93.103 93.102 0% -3.89%
All data taken from Reuters at 0946 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)
