* CEE currencies rebound from sharp falls post-EU summit
* Forint up despite Fitch outlook cut
* Markets eyeing possible IMF aid for Romania
* Bonds move sideways, sentiment fragile
(Adds new quotes, prices, government bonds.)
By Krisztina Than and Gergely Szakacs
BUDAPEST, March 3 (Reuters) - Central European currencies
regained a foothold on Tuesday after sharp falls on Monday
following a weekend EU summit which rejected a mass bailout plan
for the region.
Dealers said a weakening of the dollar could provide some
support for currencies on Tuesday, but any potential gains would
likely be limited and the region remained prone to weakness,
given concerns over growth, banks and some countries' dependence
on external financing.
Stock markets in Europe, which also firmed in early trade,
were mixed at 0945 GMT.
"We are looking today at a correction, which will probably be
short-lived, after the massive falls yesterday," said Jakub
Wiraszka, FX dealer at BRE Bank.
"There is nothing really that is fundamentally supporting
the zloty today."
Fitch Ratings on Monday cut the outlook on Hungary's
long-term foreign and local currency ratings to negative from
stable, citing a worsening economic outlook and debt risks,
while leaving its ratings unchanged.
The move, just the latest of negative ratings activity for
Hungary, had little market impact, and analysts said ratings
agencies may issue more warnings over some economies in the
region which have been hit by the impacts of the global crisis.
"There is no reason to become too happy too soon," one
Budapest-based currency dealer said. "The market has no depth
and the forint is likely to move sideways between 300 and 310
(against the euro in the short term)."
By 0945 GMT, the forint <EURHUF=> had inched up 0.1 percent
to 306.53 to the euro. The Czech crown <EURCKZ=> gained 0.5
percent and the Polish zloty <EURPLN=> rose 0.8 percent from
Monday's closing levels.
Romania's leu <EURRON=> was up 0.3 percent though dealers
said the leu had shown little reaction to reports that Romania
is in preliminary talks with the International Monetary Fund
(IMF) for a potential loan.
They said any IMF aid deal was unlikely to strengthen the
leu as the unit was held artificially at current levels through
indirect intervention by the central bank.
Romania has started preliminary discussions with the IMF on
aid to help patch up finances strained by global crisis and calm
nervous markets, a source close to the talks said on Monday.
[]
SENTIMENT JITTERY
Hungary's central bank announced on Monday that seven
Hungarian banks have applied for up to 2.81 billion euros of
funding from its six-month euro/forint swap facility to boost
lending to the corporate sector.[]
There was no allocation at the first weekly tender on Monday
<NBHN>.
"Given the attached conditions for the 6M facility (banks
have to commit to raise equal amount of external funding or
reduce external funding) we consider the announcement as a very
positive sign," UniCredit said in a note.
"The key question now (is) if banks can keep their
commitments to co-finance," it added.
Polish and Hungarian government bonds changed little after a
rise in yields on Monday, but traders said volatile exchange
rates maintained uncertainty in the fixed income market.
"Yields are being kept high by the weak zloty, on the
longer-end risk aversion in the region and globally, as well as
the expected high supply of debt from the government," one
Warsaw-based trader said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 28.05 28.19 +0.5% -4.62%
Polish zloty <EURPLN=> 4.738 4.774 +0.76% -13.15%
Hungarian forint <EURHUF=> 306.53 306.8 +0.09% -14.02%
Croatian kuna <EURHRK=> 7.371 7.426 +0.75% -0.08%
Romanian leu <EURRON=> 4.294 4.306 +0.28% -6.51%
Serbian dinar <EURRSD=> 93.59 93.672 +0.09% -4.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 230bps over bmk*
4-yr T-bond CZ4YT=RR -1 basis points to +250bps over bmk*
8-yr T-bond CZ8YT=RR -22 basis points to +307bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +452bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +386bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +324bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -28 basis points to +1164bps over bmk*
5-yr T-bond HU5YT=RR -62 basis points to +1022bps over bmk*
10-yr T-bond HU10YT=RR -50 basis points to +830bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1045 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaus; Editing by Patrick Graham)
