* Polish cbank head's comments support currency
* FX up as external economic data better
* Bonds stay weak, Hungary yields at multi-month highs
(Updates throughout)
By Dagmara Leszkowicz and Jason Hovet;
WARSAW/PRAGUE, Nov 24 (Reuters) - Improved German business
sentiment drove central European currencies to modest gains on
Wednesday, with the Polish zloty taking the lead after bullish
comments by the central bank on the currency's potential.
Stocks rose up to 0.9 percent but bonds dipped as worries
over the euro zone periphery's debt and tensions on the Korean
peninsula continued to crimp risk appetite, which limited gains
for the region.
By 1534 GMT, Hungary's forint <EURHUF=> gained 0.2 percent,
shrugging off news of government plans to take over sole power
to appoint central bank rate setters. The move could pave the
way for somewhat looser monetary policy, analysts believe.
Romania's leu <EURRON=> and the Czech crown <EURCZK=> rose a
touch more than 0.1 percent, helped by the German Ifo business
climate index's rise to its strongest level since 1991. Germany
is the most important trade partner for the region.
Currencies were also boosted by a drop in U.S. jobless
claims.
The zloty <EURPLN=> added 0.4 percent against the euro to
3.955, but oscillated around its 100-day moving average. Dealers
said breaching this would mean further weakening, likely to
above 4.00 against the euro.
Speaking to reporters on Tuesday after the bank left
interest rates flat for the 17th month running, Polish central
bank Governor Marek Belka said the zloty had "great potential"
to appreciate by more than 10 percent, though he gave no
timeframe. []
"It looks like a very soft verbal intervention as officials
are concerned over the external factors that could push the
zloty lower," said Jakub Wiraszka, dealer at BRE bank in Warsaw.
Poland's key interest rate stands at an all-time low of 3.5
percent, but many economists expect the central bank's Monetary
Policy Council to start raising borrowing costs from early 2011.
Central European currencies have weakened this month amid
concerns that a battle against crippling debt on the euro zone
periphery will spread to Portugal and possibly Spain after first
Greece and then Ireland sought emergency funds.
Credit agency Standard & Poor's downgraded Ireland's debt
rating overnight.
GLOBAL MOOD DOMINATES
Local factors have mostly taken a backseat to the swings in
the global mood.
In Romania, the centrist coalition is expected to approve an
IMF-mandated single wage bill for the public sector. The
government is facing a series of no confidence votes in
parliament, making implementation of fiscal reforms more
difficult.
Analysts have said a plan by Hungary's government to change
the central bank law so it has full power over appointments to
its rate-setting board from the first quarter next year could
lead to easier policy.
"If the government shakes up the Monetary Council, that
could lead to interest rate cuts... (but) markets do not react
to policy news at the moment," one bond trader said.
Hungarian bond yields have risen to multi-month highs in the
past few weeks, with the 5-year bond rising 5 basis points on
Wednesday to touch a 4-1/2 month high.
The Czech 9-year bond yield was at a 3-1/2 month high, up 3
basis points on the day <CZ1002851=>. The Czechs sold what it
planned at an auction for a new 11-year bond and demand was
better than expected despite nervousness in the euro zone
periphery. []
The ministry has sold less than planned in its last six
auctions since rounding out much of its 2010 borrowing with a
eurobond in September.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.661 24.693 +0.13% +6.72%
Polish zloty <EURPLN=> 3.955 3.97 +0.38% +3.77%
Hungarian forint <EURHUF=> 275.11 275.55 +0.16% -1.73%
Croatian kuna <EURHRK=> 7.41 7.398 -0.16% -1.36%
Romanian leu <EURRON=> 4.304 4.31 +0.14% -1.55%
Serbian dinar <EURRSD=> 106.63 106.77 +0.13% -10.08%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -9 basis points to 80bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +72bps over bmk*
10-yr T-bond CZ9YT=RR -6 basis points to +98bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +375bps over bmk*
5-yr T-bond PL5YT=RR -8 basis points to +352bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +321bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +613bps over bmk*
5-yr T-bond HU5YT=RR -3 basis points to +581bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +505bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1633 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus; Writing by Dagmara Leszkowicz
and Jason Hovet; Editing by John Stonestreet)
