(Adds details, fixed income)
PRAGUE, Sept 25 (Reuters) - The Czech crown led losses in
central Europe as a week of interest rate decisions in the
region gathered pace, pricing in overnight nerves over a U.S.
bailout of markets which on Thursday looked close to completion.
The Romanian central bank as expected followed Poland's bank
by keeping rates on hold in a morning decision, while the Czech
central bank is seen doing likewise later on Thursday.
[].
The crown <EURCZK=> fell 0.5 percent to 24.450 to the euro
by 0834 GMT, compared with a 0.2 percent loss for Poland's zloty
<EURPLN=>, down at 3.334 per euro. The Hungarian forint
<EURHUF=> dipped to 240.9 from Wednesday's close of 240.65.
Romania's leu <EURRON=> fell 0.1 percent in early trade to
3.682 to the euro, also under pressure after Romania's president
hammered his centrist government for putting 2014 euro adoption
plans at risk.
Global risk appetite eased overnight due to uncertainty over
the $700 billion U.S. bailout, aimed to unclog bad debt from
credit markets. But congressional sources said late on Wednesday
in Washington that a deal looked near.
The region has been largely insulated from the fallout on
global money markets over the past week, and a Czech central
banker said on Thursday no special measures were needed
([]).
But dealers said the mood was still tense.
"Markets are under pressure," a Prague trader said. "This
weekend is key for the next developments."
Analysts see a crown firmer than 24 per euro as too strong
for the Czech central bank, and the currency fell around 1
percent on Wednesday after flirting with that level for several
days.
The Czech bank (CNB) was the first in the region to cut
interest rates last month as its focus shifted to a slowing
economy, and it is seen easing further after holding fire this
month. That is expected to keep the crown under pressure.
"Today the (expected) CNB no change verdict and dovish
comments should not provide much relief to the (crown)," KBC
analysts wrote in a morning note.
Poland's central bank kicked off a round of regional policy
meetings on Wednesday, holding rates steady but leaving the door
open to the single further rate hike that markets expect this
year.
The zloty eased a touch and on Thursday Polish 5-year and
10-year bonds strengthened early, while 2-year bonds remained
stable.
"It seems the short end of the curve is pricing in one more
rate hike, but investors are not sure whether that would be the
end of tightening cycle," a dealer at a Warsaw-based bank said.
Expectations of further monetary tightening in Poland, where
inflation is nearly double the central bank's target, have been
boosted by the government's decision to push ahead with
sooner-than-expected euro entry.
Poland plans to ready itself for meeting euro adoption
requirements in 2011, with euro zone entry seen a year later.
Slovakia will be the first regional country to swap for
euros in January, while the Czech Republic, Hungary and Romania
are not seen joining until after 2013.
Romanian President Traian Basescu on Thursday warned
government spending plans ahead of a November election put
Romania's euro entry plans and economy at risk [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.450 24.336 -0.47% +7.73%
Polish zloty <EURPLN=> 3.334 3.327 -0.21% +7.4%
Hungarian forint <EURHUF=> 240.900 240.650 -0.10% +4.73%
Croatian kuna <EURHRK=> 7.123 7.112 -0.15% +2.78%
Romanian leu <EURRON=> 3.682 3.678 -0.11% -2.84%
Serbian dinar <EURRSD=> 76.418 76.425 +0.01% +2.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -3 basis points to 17bps over bmk*
5-yr T-bond CZ5YT=RR -5 basis points to +4bps over bmk*
10-yr T-bond CZ9YT=RR -8 basis points to +26bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -1 basis points to +254bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +201bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +161bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +543bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +498bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +376bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1034 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham)
