* Czech rates seen unchanged after Romania holds
* Currencies, bonds fall after recent gains, equities mixed
* Markets may be overpricing rate increases in region
(Adds bonds, new comments and prices)
BUDAPEST, Feb 3 (Reuters) - Central European currencies
eased on Thursday amid signs investors may be scaling back
expectations of how quickly interest rates will rise in the
region.
Romania's central bank kept rates on hold on Thursday and
the Czech central bank was expected to leave policy unchanged
later in the day -- while accelerating inflation is expected to
top the agenda at the European Central Bank's monthly meeting.
A Reuters poll on Wednesday suggested forward rate curves on
the European Union's eastern wing are overpricing future rate
increases. []
The Hungarian forint <EURHUF=> paused after soaring to a
nine-month high at 268.10 in overnight trade following recent
rate hikes and on hopes of fiscal reform.
The forint, the Polish zloty <EURPLN=> and leu <EURRON=> all
weakened by 0.1 percent against the euro by 1057 GMT, with the
leu unchanged after the interest rate decision in Romania, where
the central bank's next move is expected to be a cut as the
country struggles to emerge from recession.
The Czech crown <EURCZK=> was flat at 24.095. The forint was
bid at 269.23, the zloty at 3.912 and the leu at 4.258.
Assets in the region have in general firmed in recent weeks
as concerns over the euro zone debt crisis eased, and government
bonds joined Thursday's profit-taking.
Hungarian yields rose 6-9 basis points from three-month lows
and Polish yields were up 1-2 basis points.
Hungary sold 12-month Treasury bills at an average yield of
5.96 percent at auction, below levels at a sale of the same
paper two weeks ago. []
"The market no longer expects the central bank (NBH) to lift
interest rates further (from 6 percent)," one Budapest-based
fixed income trader said.
The NBH has raised rates in three 25 basis point steps since
November to fight inflation, and changes in its rate-setting
council by March are seen turning it more dovish.
"I can't really justify this big forint rally," a Budapest
based dealer said. "I think we may edge back towards EUR/HUF 270
-- although breaking the recent peaks might push it toward more
gains, with 265 the next resistance level."
CENTRAL BANK COMMENTS AWAITED
Strong currencies and stuttering recovery should limit the
scope for rate hikes in the region, analysts have said.
[]
Czech markets will watch whether the central bank's rhetoric
turns more hawkish at a press conference following the rate
decision. Analysts expect the bank's new macroeconomic forecasts
to show higher growth for this year.
"We do not expect any change in official rates, the rhetoric
at the press conference after the announcement might have
stronger impact this time as the new macro forecast will be
published," Komercni Banka traders said in a note.
Markets will also watch the tone of the Romanian central
bank's comments. "We do believe that supporting the economic
recovery would require acting now, not later, but this could be
very costly in terms of inflation," ING Bank said in a note
ahead of the rate decision.
Poland's central bank is widely expected to raise interest
rates further after a 25 basis point increase last month, and
the zloty is expected to outperform regional peers in the next
12 months. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.095 24.092 -0.01% +3.76%
Polish zloty <EURPLN=> 3.912 3.908 -0.1% +1.18%
Hungarian forint <EURHUF=> 269.23 268.99 -0.09% +3.25%
Croatian kuna <EURHRK=> 7.418 7.42 +0.03% -0.51%
Romanian leu <EURRON=> 4.258 4.256 -0.05% -0.59%
Serbian dinar <EURRSD=> 103.62 103.91 +0.28% +2.23%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +3 basis points to 35bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +61bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +76bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +353bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +332bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +296bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +9 basis points to +492bps over bmk*
5-yr T-bond HU5YT=RR +11 basis points to +450bps over bmk*
10-yr T-bond HU10YT=RR +8 basis points to +395bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1157 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaux, writing by Marton Dunai and
Sandor Peto; Editing by Catherine Evans, John Stonestreet)
