* Investors shift from zloty to forint on rate expectations
* Crown flat ahead of rate meeting on Thursday
* Demand for Czech floating rate bond strong
* Leu close to highs after cbank "verbal intervention"
(Updates prices, adds Czech rate expectations, bond auction)
By Sam Cage and Jana Mlcochova
BUCHAREST/PRAGUE, March 23 (Reuters) - Hungary's forint shed
some early gains but stayed firmer on the day on Wednesday as
the prospect of interest rate cuts receded, while the Czech
crown was flat with investors eyeing a rate meeting on Thursday.
The forint <EURHUF=> rose 0.2 percent to 270.2 against the
euro, gaining for the fifth successive session, which dealers
said reflected a shift from zlotys into forints as investors
revise expectations both of an imminent Polish rate hike and of
lower rates in Hungary.
Expectations that Hungary will issue a new benchmark dollar
bond after investor roadshows in the United States and Europe
are completed were also supporting the currency.
"The rate hike in Poland seems to be postponed, while our
new Monetary Council is not expected to start cutting rates like
crazy," a forex dealer in Budapest said. []
Czech policymakers are scheduled to meet on interest rates
on Thursday and investors were in wait-and-see mode, leaving the
crown barely changed in thin trade.
"Investors hold minimum positions in the crown as they are
waiting for the bank and the reaction afterwards," said CSOB FX
dealer David Sykora.
Nineteen out of 20 analysts polled by Reuters expected no
change in rates, and 12 said a hike would come by June, the same
as bets on interest rate markets <CZKFRA> which price in a
quarter-point hike in three months' time.
The crown <EURCZK=> was flat against the euro at 24.4 per
euro by 1445 GMT, 0.02 up on the day.
The Czech Finance Ministry sold the amount planned in the
eighth auction of its floating rate bond due 2016 as investors
snatched up the relatively cheap paper, bidding more than three
times the amount finally sold.
Dealers said prospects that interest rates will start to
rise made floating rate debt an attractive investment.
[]
Hungarian government bond yields dropped by a few basis
points, tracking gains in the forint and with sentiment
supported by market optimism over Thursday's bond tender
<HUISSUE> and the planned foreign currency bond sale.
LEU CLOSE TO HIGHS
The leu <EURRON=> rose 0.3 percent to 4.116 per euro,
pushing towards a 10-month high of 4.111 hit last May after the
central bank told Reuters on Tuesday that recent currency
strength was underpinned by economic fundamentals.
[]
"The statement could be considered as a verbal intervention,
and the reason for the sharp move in the pair (was that) market
players interpreted it as implying the (central bank) is more
than comfortable with current EUR/RON levels," said ING's
Nicolaie Alexandru-Chidesciuc.
One dealer said he was looking for consolidation at around
4.12-4.14. "Flows are pretty good and yesterday I guess was the
largest traded volume for this year," he added.
Poland's zloty <EURPLN=> rose after data showed retail sales
rose by a much higher-than-expected 12.2 percent year-on-year in
February, but erased earlier gains to trade 0.05 percent lower
on the day by 1439 GMT. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.396 24.394 -0.01% +2.48%
Polish zloty <EURPLN=> 4.034 4.034 0.0% -1.88%
Hungarian forint <EURHUF=> 269.26 270.2 +0.35% +3.24%
Croatian kuna <EURHRK=> 7.38 7.374 -0.08% 0.0%
Romanian leu <EURRON=> 4.113 4.127 +0.34% +2.92%
Serbian dinar <EURRSD=> 103.2 103.22 +0.02% +2.64%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 9bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +67bps over bmk*
10-yr T-bond CZ9YT=RR +4 basis points to +72bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +332bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +326bps over bmk*
10-yr T-bond PL10YT=RR +4 basis points to +307bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1600 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
(Reporting by Reuters bureaus; Editing by Catherine Evans)
