* Currencies firm on better global sentiment
* Investors eye Hungary's c.bank rate decision at 1300 GMT
* Region's monetary easing trend seen paused
* Poland sticks to euro plans
(Updates prices, adds Polish ERM-2 comments)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, Feb 23 (Reuters) - A rally in stocks
helped Central European currencies extend a rebound on Monday
and investors eyed a Hungarian central bank meeting that is
expected to mark a pause in the region's policy easing.
The lowering of interest rates to combat tumbling economic
activity has helped speed a selloff and send the region's
currencies spiralling to multi-year or record lows this year.
Hungary has slashed 200 basis points off an emergency 3
percentage point rate hike since October, and analysts expect a
pause as looser policy threatens the Hungarian forint and
stability in the financial sector. []
Currencies extended gains from late last week on Monday
after a media report said the U.S. government could raise its
stake in Citigroup to as much as 40 percent, which lifted stocks
and weakened the dollar. []
Markets clawed back some losses last week to cap a
rollercoaster five days as worries over emerging Europe's
foreign debt exposure grew -- rattling western banking stocks,
prompting policymakers to verbally step in, and many strategists
to call the rapid declines overdone. []
[]
By 1143 GMT, the forint <EURHUF=> rose 1.9 percent to the
strong side of 300 per euro, and the Polish zloty <EURPLN=> 1.2
percent. The Czech crown <EURCZK=> had added 0.8 percent, while
Romania's leu <EURRON=> traded a touch down.
The Hungarian debt market was in a wait-and-see attitude
before the central bank meeting, while Polish bond prices were
gaining from the zloty's strengthening, dealers said.
Poland converted EU funds to prop up the zloty last week,
while Hungary's prime minister asked the central bank last week
to explore "unconventional" means to stem forint losses.
"We've been guessing all week what he could have meant and
maybe today's news conference (by central bank governor Andras
Simor) will shed some light on that," a Budapest dealer said.
The weak currencies have caused rising principals and
monthly payments for households and businesses in Hungary,
Romania and Poland that sought cheaper foreign currency loans in
the past -- but give small relief to exporters that have seen
demand for their goods sink in the recession-hit euro zone.
Volatile currencies and rising budget deficits in the wake
of the global economic crisis have also put doubt on
government's ambitions to adopt the euro zone's single currency.
A Czech deputy finance minister said a doubling of the deficit
would push euro entry to beyond 2014. []
In Poland -- which aims to join the euro zone the soonest
after central Europe's smallest state Slovakia switched to euros
this year -- a deputy finance minister said the country could
enter the testing ground ERM-2 by early June. []
[]
Polish companies have been hurt badly by wrong-way bets the
zloty would continue to rise from record highs last summer.
[] The unit has been among the worst-performing
emerging currencies since, and has lost 12.3 percent this year.
The forint is down 11.7 percent in 2009, while the crown is
off 6.3 percent and the leu 6.4 percent.
Prime Minister Donald Tusk said on Friday the worst is past
for the zloty [], but some analysts disagreed.
"We do not share his view," Commerzbank said in a note. "The
MPC's stance remains crucial ... The zloty heavily suffers from
an expansionary monetary policy, (and its) slide will only end
when this policy stops."
Analysts forecast this month that any serious recovery for
the forint, zloty, crown and leu would not come until the second
half of the year. []
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.55 28.774 +0.78% -6.29%
Polish zloty <EURPLN=> 4.692 4.747 +1.17% -12.3%
Hungarian forint <EURHUF=> 298.29 303.93 +1.89% -11.65%
Croatian kuna <EURHRK=> 7.48 7.48 0% -1.54%
Romanian leu <EURRON=> 4.288 4.278 -0.23% -6.38%
Serbian dinar <EURRSD=> 94.688 94.78 +0.1% -5.5%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +12 basis points to 191bps over bmk*
4-yr T-bond CZ4YT=RR +32 basis points to +224bps over bmk*
8-yr T-bond CZ8YT=RR -5 basis points to +198bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -9 basis points to +444bps over bmk*
5-yr T-bond PL5YT=RR -15 basis points to +364bps over bmk*
10-yr T-bond PL10YT=RR -9 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +1221bps over bmk*
5-yr T-bond HU5YT=RR +23 basis points to +1068bps over bmk*
10-yr T-bond HU10YT=RR +25 basis points to +904bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1112 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
*Benchmark is German bond equivalent.
All data taken from Reuters at 1246 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/Jason Hovet, editing by Andy Bruce)
