* CEE central banks in unprecedented verbal intervention
* Cen banks say currency falls not backed by fundamentals
* Currencies jump, forint up to 3.6 pct on the day
By Jan Lopatka and Krisztina Than
PRAGUE/BUDAPEST, Feb 23 (Reuters) - Central Europe's central
banks took the unprecedented step of joint verbal intervention
to support the region's currencies on Monday, saying a sharp
drop in recent months did not reflect economic fundamentals.
Hungarian policymakers also left interest rates unchanged,
and central bankers from Budapest, Prague, Warsaw and Bucharest
all came out to say the currency falls in the past few weeks had
been overplayed. Economists, however, said they would probably
have to back up their talk with action.
The coordinated move boosted units across the region. The
Czech crown <EURCZK=>, Hungarian forint <EURHUF=> and Polish
zloty <EURPLN=> each jumped around 1 percent against the euro
after the comments, adding to earlier gains.
"It is a fact that coordination at present is more intensive
than at other times and that we share the opinion that the
currency swing in a number of countries does not correspond to
the real economic situation," Czech central bank chief Zdenek
Tuma told Reuters in a an interview.
"We agreed in this respect that we will comment on the
development in a similar way and of course we will further
continue in a more intensive communication than usually."
Central European markets have been battered in the past few
weeks as investors worried about the countries' exposure to
foreign currency debt and a slump in exports as the global
financial crisis swept into the region.
Their banking systems, in some cases dependent on external
financing, have raised worries over their ability to ride out
the currency drops and tight external financing.
The zloty and forint are still down 10 percent for this year
against the euro, with the Polish currency having lost about a
third of its value since last July. The leu is down 6.1 percent,
and Czech crown 4.6 percent.
In Poland the weakness has particularly hit firms that bet
wrongly against the euro when the zloty was strong last year.
Polish and Hungarian borrowers who took out mortgages and other
loans in currencies such as the Swiss franc and the euro have
also suffered because their debt has mushroomed as their home
currencies fell.
WORDS NOT ENOUGH
A number of policymakers and states including Austria --
whose banks are heavily exposed to central and eastern Europe --
and British Prime Minister Gordon Brown have called for aid to
the region.
Analysts said action would have to follow the verbal
intervention to stop the currencies' slide.
"This is of course a clear signal that the CEE central banks
are very concerned about the situation and will try to curb the
selloff in the currencies," said Lars Christensen, head of
emerging markets research at Danske Bank.
"We doubt that verbal intervention is enough and the central
banks in the region might need to hike rates -- or get outside
help for example from the ECB (European Central Bank). That
said, this should at least in the short-term give some relief to
the CEE currencies."
Polish central bank chief Slawomir Skrzypek said his bank
could take unspecified action to reverse the zloty's fall.
"In the central bank's view, the macroeconomic situation of
Poland does not justify such a scale of zloty weakening," he
said in a statement. "The central bank can undertake action in
order to avoid the negative impact of zloty volatility on the
economy."
Coordination with other central banks in the region may
raise the effectiveness of central bank actions, he added.
The Hungarian central bank left rates flat at 9.5 percent on
Monday after 200 basis points in cuts since an emergency 300
basis point increase last October. Governor Andras Simor said a
worse risk assessment of Hungary was a factor in the decision.
In Romania, central bank Governor Mugur Isarescu said the
bank was ready to act against destabilising currency moves.
[]
Tuma said investors should distinguish between countries in
the region according to their risk profile, and said a European
debate on aid could help to make those distinctions.
