* Zloty retraces IMF gains, but seen as outperformer
* Leu continues retreat from 3-month high
* Czech bonds stronger after strong auction
(Adds details, fixed income)
By Jason Hovet
PRAGUE, April 16 (Reuters) - The Polish zloty retreated on
Thursday from a three-month high hit this week, leading emerging
European peers lower and giving up sharp gains as investors cool
on the country's move to get an IMF flexible credit line.
A global equity rebound and G20 pledges to bolster funds for
hard-hit emerging countries have boosted appetite for riskier
assets in recent weeks, but data showing emerging giant China
had its slowest quarterly growth on record dented sentiment.
"Markets are still quite risk driven," said Lutz Karpowitz,
a senior currency strategist with Commerzbank in Frankfurt.
The zloty fell 0.7 percent from Wednesday's domestic close
to bid at 4.292 to the euro by 0921 GMT.
It jumped at the start of the holiday-shortened week after
Poland said it would tap the International Monetary Fund's new
flexible credit line, while investors got more bullish on the
country's aims to enter the euro proving ground ERM-2 this year.
Karpowitz said that, while the moves would add support for
the currency, the zloty firming was overdone because no actual
IMF money was flowing in and euro hopes were not certain.
Polish central bank chief Slawomir Skrzypek said on
Wednesday that ERM-2 was not now a top priority. []
"The appreciation has been a bit on thin ice," Karpowitz
said.
The zloty has led central European currency losses since the
second half last year when the region was at record highs,
falling 22 percent, but has been the biggest gainer this month.
Strategists expect the IMF credit line (FCL) could reverse
the zloty's underperformance against regional peers. Barclays
wrote on Wednesday that it expected renewed pressure on the
region's currency as the recent risk rally dwindles.
"And the regional economies will have to grapple with the
(often lagging) effects the sharp economic downturn has on
banking sectors, employment and socio-political stability," it
said. "In such a scenario, however, the FCL has now
significantly reduced the tail risks on PLN."
RETREAT
In Hungary, the forint <EURHUF=> was 0.4 down to bid at
291.85 per euro, and the Czech crown <EURCZK=> dipped to 26.91.
Czech bond prices edged up after a Wednesday auction was
three times overbid, but the ministry sold less than previously,
which dealers said gave support after supply concerns earlier.
Romania's leu <EURRON=> shed 0.7 percent on the back of
stop-losses, falling back to 4.215 per euro after touching its
highest since January at 4.11 last week.
"There has been a wave of stop losses deals involving both
locals and foreign players," said a Bucharest dealer. "Some of
them have previously bet the leu would continue to firm."
Romania's revised government budget forecasts an average
exchange rate of 4.3 lei per euro for this year.
Romania followed EU members Latvia and Hungary last month in
tapping an IMF aid package to plug financing holes. Their
packages come with stricter fiscal conditions than Poland's.
The global downturn has punished central Europe's
export-driven economies, although Poland is expected to eke out
growth this year while other economies contract.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.91 26.815 -0.35% -0.58%
Polish zloty <EURPLN=> 4.292 4.261 -0.72% -4.12%
Hungarian forint <EURHUF=> 291.85 290.65 -0.41% -9.7%
Croatian kuna <EURHRK=> 7.373 7.372 -0.01% -0.11%
Romanian leu <EURRON=> 4.215 4.185 -0.71% -4.76%
Serbian dinar <EURRSD=> 92.85 93.27 +0.45% -3.63%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +40 basis points to 218bps over bmk*
4-yr T-bond CZ4YT=RR -19 basis points to +200bps over bmk*
8-yr T-bond CZ8YT=RR -8 basis points to +292bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1122 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; Editing
by Toby Chopra)
