* Politics hangs on leu despite election finale
* Investors book profit on other FX, econ data improves
(Updates throughout)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Dec 7 (Reuters) - Romania's leu slipped with
central European peers on Monday, unable to shake nagging
political uncertainty after incumbent President Traian Basescu
won an election runoff by a razor-thin margin.
Basescu claimed re-election with a narrow 50.3 percent of
the vote on Sunday to 49.7 percent for his second round opponent
Social Democrat Mircea Geoana, whose side claimed fraud in a
sign the political impasse that has stalled the country's 20
billion euro IMF-led aid package would drag on.
The country, among emerging Europe's hardest hit in the
economic downturn, has been left without a government since a
cabinet collapse in October, with Basescu appointees unable to
garner parliamentary backing. [] []
The leu has been mostly paralysed in the past two months,
with dealers saying central bank intervention has propped the
currency up during that time, though the bank has refused to
comment.
The currency <EURRON=> bid 0.2 percent down at 4.23 to the
euro by 1513 GMT, in line with losses of other central European
currencies as investors booked some profits from a week of
gains, with Hungary's forint dropping 0.3 percent.
"We believe that long delays in forming a new government or
snap elections constitute an important risk," Citigroup said.
"Concerning the latter, we think that the probability of
early general elections is rather low, given the absence of
strong incentives among the major political parties to go for
snap elections."
Last month, the International Monetary Fund suspended a
review of the aid deal propping up the EU's second poorest
economy. Markets also remain worried about the pace of reform in
the country. []
Romania's economy shrank 7.1 percent in the third quarter,
although the data was better than what analysts had expected and
some said pointed to recovery next year.
POSITIONING
Analysts agree central Europe is past its worst though
government debt is sharply rising in the region, keeping a drag
on economic recovery and leaving financial markets vulnerable.
Poland's 2010 borrowing needs will be lower than planned
next year and a key debt safety level watched by markets will
not be breached, Deputy Finance Minister Dominik Radziwill told
Reuters on Monday. []
Strategists see the currency firming next year and are most
bullish on the zloty as Poland, the only country in the region
to avoid recession, is best placed in recovery with a consumer
base four times larger than neighbours. []
The Polish unit has scaled 11-month highs in the past week
on the improving outlook for central European and global
economies. It bid 0.2 percent lower on Monday at 4.069 per euro.
"The Polish zloty was undervalued for the last few months
despite its good fundamentals and at a time when the impulse
came from abroad (in the form of more positive U.S. data last
Friday) it had no choice but to strengthen," said Ulrich
Leuchtmann, head of FX research at Commerzbank in Frankfurt.
Elsewhere, the Czech crown <EURCZK=> was also slightly down,
tracking its regional peers and brushing off an improving trade
surplus on sharply falling imports. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.689 25.656 -0.13% +4.14%
Polish zloty <EURPLN=> 4.069 4.061 -0.2% +1.13%
Hungarian forint <EURHUF=> 269.35 268.44 -0.34% -2.15%
Croatian kuna <EURHRK=> 7.274 7.305 +0.43% +1.25%
Romanian leu <EURRON=> 4.23 4.222 -0.19% -5.1%
Serbian dinar <EURRSD=> 95.99 96.94 +0.99% -6.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +29 basis points to 115bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +107bps over bmk*
10-yr T-bond CZ10YT=RR +6 basis points to +96bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +17 basis points to +530bps over bmk*
5-yr T-bond HU5YT=RR +14 basis points to +489bps over bmk*
10-yr T-bond HU10YT=RR +12 basis points to +432bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1614 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 Mike Peacock and Victoria Main)
