* Leu edges up as Romania closer to IMF deal
* Hungary cbank continues talking up forint
* Key Polish cbanker says there may be no room for rate cuts
(adds more detail, fixed income)
By Marius Zaharia
BUCHAREST, March 10 (Reuters) - The Romanian leu firmed
against the euro on Tuesday as the country appeared to move
closer to an IMF deal, and Hungary's central bank chief boosted
the forint with a pledge to defend it.
Hungarian central bank Governor Andras Simor said on Tuesday
the bank is ready to act if measures fail to stop the forint's
swift decline, the latest move from emerging Europe's
policymakers to stop a sell-off that has dragged currencies near
record lows. []
Capital flows to the region that once fuelled booming growth
have reversed, putting strain on many countries. In a note on
Tuesday, Merrill Lynch analysts estimated the region would need
combined gross external financing of $460 billion in 2009.
In Romania, an International Monetary Fund mission is due to
start a two-week visit on Wednesday to discuss a potential loan
programme. President Traian Basescu told Parliament on Monday a
foreign loan was the only solution to safeguarding the troubled
economy. []
"This is positive for the leu, the market is happy with the
prospect of an IMF deal," one dealer in Bucharest said.
The Romanian leu <EURRON=> added 0.3 percent from Monday's
domestic close. Signs of covert central bank intervention this
year has kept it from double digit falls of some peers.
Romania will likely be the third EU member to seek IMF help,
after Hungary and Latvia. Its representative to the IMF Fund in
Washington said on Tuesday he envisioned a potential programme
for Romania running for at least two years [].
The EU was likely to be part of any deal, and its monetary
affairs commissioner said late on Monday the bloc was ready to
negotiate with Romania. An EU draft document also showed the EU
was set to back an IMF call for $500 billion to fight the
financial crisis. [] []
However, concerns over the effects of such IMF programmes
have emerged. Unlike Latvia, Romania has not experienced street
protests but analysts believe social pressures will mount and
threaten the stability of the new government coalition.
VERBAL DEFENCE
In Poland, the zloty <EURPLN=> gained 0.2 percent and the
Czech crown <EURCZK=> rose 0.5 percent. The Hungarian forint
<EURHUF=> firmed 0.7 percent to 307.69 to the euro, but has lost
14 percent this year, pacing 2-13 percent losses for the region.
Policymakers across the region have repeatedly stated over
the past weeks that currencies were undervalued and urged for
differentiation of those economies in the region -- like Poland
and the Czech Republic -- with better fundamentals.
Analysts predict further weakening for most of the region.
"The previous flow of capital is turning into an ebb which
is fundamentally what will maintain pressure on currencies," SEB
chief emerging markets strategist Mats Olausson said.
Hungary's defence on Tuesday followed a statement on Sunday
that said it would channel European Union funds into the market
and pump euro liquidity into the banking system to prop up the
unit. Dealers said the comments have provided some support.
In Poland, a policymaker seen by markets as a key swing
voter at the central bank said economic conditions and a sharp
weakening of the zloty may not justify further interest rate
cuts [].
Analysts have said the recent interest rate easing cycle in
the region and further economic damage by the global financial
crisis will continue to put pressure on currencies.
Analysts polled by Reuters on Monday predicted another 25
basis points cut in Poland, but they expect a pause in easing
cycles elsewhere. In Hungary's case, hikes may be needed to
defend the currency -- although some said that would not
suffice.
"Market participants that sell the forint would not be
particularly frightened if they had to pay an extra 100 basis
points to do so," Olausson said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 27.41 27.543 +0.49% -2.4%
Polish zloty <EURPLN=> 4.728 4.736 +0.17% -12.97%
Hungarian forint <EURHUF=> 307.69 309.95 +0.73% -14.35%
Croatian kuna <EURHRK=> 7.44 7.45 +0.13% -1.01%
Romanian leu <EURRON=> 4.289 4.3 +0.26% -6.4%
Serbian dinar <EURRSD=> 93.75 94.228 +0.51% -4.55%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +23 basis points to 248bps over bmk*
4-yr T-bond CZ4YT=RR -21 basis points to +240bps over bmk*
8-yr T-bond CZ8YT=RR -16 basis points to +310bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +453bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +403bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +345bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +19 basis points to +1264bps over bmk*
5-yr T-bond HU5YT=RR +37 basis points to +1146bps over bmk*
10-yr T-bond HU10YT=RR +29 basis points to +984bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1145 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus; Writing by Marius Zaharia;
Editing by Patrick Graham)
