* FX weaker on stocks, stop losses
* Region seen decoupling from dollar course
* Bonds weaker, regional rate moves eyed
(Adds bond market, updates fx)
BUDAPEST, May 22 (Reuters) - East European currencies
weakened slightly on Friday morning after a fall in U.S. stock
markets and position closing ahead of the weekend may trigger
more easing during the day, traders said.
The region's currencies eased with the zloty, the crown and
the forint all shedding about a third of a percent to the euro
by 9:30 GMT, largely shrugging off Polish President Lech
Kaczynski calling for deep budget revisions [].
They eased despite a weakening of the U.S. dollar which
often signals a bigger appetite for risk helping emerging market
currencies.
"It would ... be wrong to assume that the current rise in
EUR-USD towards 1.40 means that EMEA currencies are likely to
trend stronger. We advise to look more towards stock markets and
thus risk aversion," Commerzbank said in a daily note.
The Hungarian central bank will hold its next rate meeting
on Monday and an overwhelming majority of analysts projected in
a Reuters poll [] that the bank would keep interest
rates on hold at 9.5 percent <NBHI>.
"I expect some preventive stop-loss moves as some investors
might play it careful ahead of the long weekend in the U.S. and
the UK, and they are afraid the central bank might decide to cut
rates on Monday. The forint may weaken past 280 today," a
Budapest-based currency dealer said.
A Warsaw-based dealer said the zloty may go back to 4.50,
adding that emerging Europe appeared to be on the sidelines now,
"less attractive for speculation as investors have moved to
Turkey or Israel."
"If the euro/dollar crawls over 1.40 and moves further up,
it will definitely trigger a sell-off on the stops," said David
Sykora, dealer from CSOB in Prague. "That could result in
dollar/crown selling and the crown thus could move to the lower
end of the range or even below it."
BONDS WEAKER
Hungary's bond yields widened about 15 basis points across
the curve after the state debt management agency AKK failed to
sell all of the bonds on offer at Thursday's bond auction.
"That the strong forint and high interest rates together
aren't enough to give more support to bonds is a signal that the
AKK has not been able to resuscitate the market yet," a dealer
in Budapest said.
"Foreign investors keep decreasing their holdings of
Hungarian papers," he added. "Bad data and economic news keep
coming, so I do not think this rally will last much longer."
"Locally, we cannot find any positive news for the upcoming
period," Raiffeisen bank analyst Zoltan Torok said in a note.
"Political risk could increase with a serious defeat of the
ruling Socialist Party at the EP elections (7 June)."
In Poland, yields have also widened, moving toward the edges
or a narrow range, the Raiffeisen note said.
"We see higher bond yields as a temporary state,"
Raifeisen's analysts wrote. Levels could stay elevated until the
National Bank of Poland resumes its rate cuts, sooner than at
June's meeting, they added.
Markets have kept speculation alive of Czech interest rate
cuts after recent doveish tones from some central bankers, but
Raiffeisen said speculation might be overdone while keeping a
short-term buy on Czech bonds.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.746 26.645 -0.38% +0.03%
Polish zloty <EURPLN=> 4.399 4.385 -0.32% -6.46%
Hungarian forint <EURHUF=> 279 278 -0.36% -5.54%
Croatian kuna <EURHRK=> 7.295 7.436 +1.93% +0.96%
Romanian leu <EURRON=> 4.18 4.17 -0.24% -3.96%
Serbian dinar <EURRSD=> 94.51 94.56 +0.05% -5.32%
Yield Spreads
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +432bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +333bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +283bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -25 basis points to +854bps over bmk*
5-yr T-bond HU5YT=RR -59 basis points to +779bps over bmk*
10-yr T-bond HU10YT=RR -50 basis points to +649bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1130 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai; editing by Stephen Nisbet)
