* Leu hits another all-time low vs euro, then rebounds
* Hungary forint near all-time lows vs Swiss franc
* Analysts say central banks may intervene to support units
* Poland, Romania rate decisions Weds may provide direction
(Adds leu rebound, fixed income)
By Sam Cage
BUCHAREST, June 29 (Reuters) - Emerging Europe's currencies
continued to slide on Tuesday, knocked by concerns about the
speed of economic recovery and increasing the likelihood that
central banks would intervene.
Romania's leu rebounded a touch on the day after hitting a
fresh record low against the euro, with traders betting it would
secure the next tranche of an IMF-led aid deal after cutting
wages and hiking value added tax. []
Dealers said the prospect of Romania's central bank stepping
in to support the leu, which has lost more than 2 percent since
planned pension cuts were ruled illegal last week, was also
supporting the currency.
Hungary's forint remained close to all-time lows versus the
Swiss franc <CHFHUF=>, raising concerns over the country's large
stock of franc-denominated debt. About 95 percent of its private
sector FX loans are denominated in francs.
"It's going to be a bloodbath today," a Budapest-based
dealer said. "EUR/CHF is down to 1.3250, the leu looks horrible,
and the forint is diving along with it.
"If the euro weakens to 1.30 against the franc, we could hit
220 (CHF/HUF) in a massive way," the dealer said. "We need some
more time before that happens, but it looks like that level
attracts it like a magnet."
Hungarian bond yields were some 10 basis points higher than
Monday's levels, but the rise was not as extreme as some of the
jumps seen this month. Considering the market's concerns about
the forint-franc relationship, the cost of the country's debt
was staying relatively low, a Budapest-based bond dealer said.
By 0933 GMT the leu <EURRON=> was up 0.2 percent against the
euro and the forint <EURHUF=> fell 0.4 percent. Poland's zloty
<EURPLN=> fell 0.5 percent and the Czech crown <EURCZK=> edged
0.1 percent lower.
"It looks like markets are pushing central banks to act and
... the regional CenBanks have the ammo to do it," Cheuvreux
analyst Simon Quijano-Evans said in a note.
"Indeed, we need to see some sort of concerted action from
monetary authorities on the FX market. Even one central bank's
action -- ie Romania or Hungary -- would help reduce the
spillover effects."
The cost on insuring the sovereign debt of Romania, Hungary
and Bulgaria also rose, according to CMA DataVision.
FOCUS ON INTEREST RATES
Romania's central bank has intervened on markets in the past
year to stop excessive weakening or firming, dealers say.
Hungary's central bank said it would not rule out
intervention when the forint was at 15-month highs against
the euro earlier this year. It has not commented now the forint
is falling.
Investors are eyeing two interest rate decisions in the
region on Wednesday, which could both be of greater interest
than usual.
It will be the first time Poland's central bank releases its
inflation projection and markets will closely watch comments
from new governor Marek Belka at his first policy sitting.
[]
Romania's central bank is now seen leaving interest rates
unchanged, rather than cutting, due to inflation concerns
following the decision to raise VAT. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.745 25.716 -0.11% +2.23%
Polish zloty <EURPLN=> 4.161 4.141 -0.48% -1.37%
Hungarian forint <EURHUF=> 286.62 285.54 -0.38% -5.68%
Croatian kuna <EURHRK=> 7.19 7.195 +0.07% +1.66%
Romanian leu <EURRON=> 4.35 4.36 +0.23% -2.59%
Serbian dinar <EURRSD=> 104 103.92 -0.08% -7.81%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 145bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +158bps over bmk*
10-yr T-bond CZ9YT=RR +7 basis points to +156bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +436bps over bmk*
5-yr T-bond PL5YT=RR +10 basis points to +409bps over bmk*
10-yr T-bond PL10YT=RR +9 basis points to +348bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +10 basis points to +656bps over bmk*
5-yr T-bond HU5YT=RR +20 basis points to +618bps over bmk*
10-yr T-bond HU10YT=RR +15 basis points to +521bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1133 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus, Editing by Sonya Hepinstall)
