* FX rally continues, though many stay cautious
* Polish bonds up on CPI view; 2-yr tender well-bid
* PMI rises in Poland, Hungary, Czech Republic
(Updates prices, adds details)
By Marius Zaharia and Jason Hovet
BUCHAREST/PRAGUE, July 1 (Reuters) - The Polish zloty jumped
on Wednesday as central Europe's currencies extended a rally
bolstered by rising PMI levels in the region and hopes the
global economy was at a turning point.
The Czech and Hungarian currencies broke technical
resistance levels and stayed around six-month highs, adding to
1-3 percent gains this week.
Polish bonds were boosted by the rising currency, dealers
said, and demand for a 2-year bond sale stayed healthy on a
lower inflation outlook that showed space remained for interest
rate cuts. []
However, Croatian stocks lost 4.5 percent after news Prime
Minister Ivo Sanader resigned unexpectedly on Wednesday, while
the kuna <EURHRK=> held steady. []
Purchasing Mangers' Indices (PMI) in the Czech Republic,
Hungary and Poland pointed closer to a recovery for the region's
manufacturing business.
However, the readings were still on the side of contraction
due to a fall in orders from the region's main export market,
the euro zone, and many analysts say actual output figures are a
stark contrast to the forward-looking indicator. []
Central European stock markets, though, rose up to 1 percent
to follow emerging peers up. Emerging shares <.MSCIEF> posted a
record 33 percent rise between April and June. []
"There is positive sentiment on stock exchanges, stocks are
rising globally and generally the appetite for risk is rising
among investors," said Marcin Turkiewicz, dealer at BRE Bank.
"But I think that nevertheless the (zloty) has found a new
range, 4.40- 4.50 and is likely to consolidate at those levels."
At 1459 GMT, the zloty <EURPLN=> was bid 2.1 percent
stronger at five-week highs of 4.368 per euro, leading regional
gains.
The Hungarian forint <EURHUF=> added 1 percent and broke the
270 to the euro level, the Czech crown <EURCZK=> gained 1.3
percent, while the Romanian leu <EURRON=> firmed by 0.3 percent.
GOOD DEBT
The euro zone's factory PMI hit its highest level since
September on Wednesday, adding to economic hopes that have
pushed investors to bet more on emerging assets. []
The Czech crown, with a 15 percent rise since mid-February,
has led gains in emerging Europe. But stronger currencies
revived expectations of rate cuts in the region.
And strategists and dealers say the rally is fragile due to
low liquidity and regional struggles with banking fragility and
the threat of a lat devaluation in Latvia, which is why some
analysts expect the rally to lose steam.
Polish yields fell by 8 basis points after a CPI estimate
showed inflation easing to 3.4 percent in June from 3.6 percent,
and Hungarian yields fell in line with the forint.
"Yields are falling like a ripe apple as the forint and the
zloty are firming," a Budapest bond dealer said. "After these
movements, the idea emerges that tomorrow's bond auction
<HUISSUE> offers could be even higher now."
Hungary decided to last month to raise the amount it
regularly auctions, with the first such sale coming on Thursday.
On Wednesday, Hungary's finance minister told Reuters the
country plans to issue a eurobond by the end of September,
hoping to capitalise on growing investor confidence in the
government's policies. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.651 25.999 +1.36% +4.3%
Polish zloty <EURPLN=> 4.368 4.46 +2.11% -5.79%
Hungarian forint <EURHUF=> 269.65 272.3 +0.98% -2.26%
Croatian kuna <EURHRK=> 7.288 7.27 -0.25% +1.06%
Romanian leu <EURRON=> 4.19 4.206 +0.38% -4.19%
Serbian dinar <EURRSD=> 93.297 93.44 +0.15% -4.09%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 151bps over bmk*
4-yr T-bond CZ4YT=RR +4 basis points to +181bps over bmk*
8-yr T-bond CZ8YT=RR +13 basis points to +300bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +381bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +323bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +282bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -5 basis points to +774bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +705bps over bmk*
10-yr T-bond HU10YT=RR -14 basis points to +608bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1700 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia/Jason
Hovet; Editing by Ruth Pitchford)
