* Czech crown steady before rate decision
* Czech central bank expected to keep rates at record low
* Forint extends gains as rate cut prospects recede
(Adds fixed income, prices)
BUCHAREST/WARSAW, March 24 (Reuters) - The Czech crown was
little changed on Thursday before a policy meeting at which the
central bank is expected to leave rates at record lows, while
Hungary's forint climbed for the sixth successive session.
Hungary steadily raised interest rates from November to
January before pausing last month, while Poland has entered a
tightening cycle in past months, and analysts expect the Czech
central bank to follow suit and raise rates later this year.
[]
Nineteen of 20 analysts in a Reuters poll expected the Czech
bank to keep the key two-week repo rate at 0.75 percent
<CZCBIR=ECI>. One analyst expected a quarter-point hike, a move
which could trigger a rise in the crown.
"The hawks on the CNB board see inflation risk from
second-round effects from commodity prices and a possible
pick-up of wage growth in 2012," said ING's Vojtech Benda.
"Even the hawks, however, prefer only a gradual rise in the
interest rate rather than aggressive tightening."
At 1022 GMT the crown <EURCZK=> remained virtually flat
against the euro before the central bank decision at 1200 GMT
and news conference at 1330 GMT. Interest rate dealer Dalimil
Vyskovsky said markets have priced in a 20 percent chance of a
rate hike.
Forward rate agreements priced in a full 25 basis point hike
only by July <CZKFRA>. The bank's February forecast implies
higher rates as of the end of the year.
The zloty <EURPLN=> rose 0.3 percent despite the euro
weakening versus the dollar after the resignation of Portugal's
prime minister. The Polish unit often tracks moves in the euro,
the region's main reference currency. []
The Polish central bank's Monetary Policy Council (MPC)
began a tightening cycle in January with a moderate rate
increase of 25 basis points and is expected to deliver another
quarter percentage point increase in April.
Poland's forward rate agreements <PLNFRA> currently indicate
a rise of 14 basis points over the next month, which means about
a 60 percent chance of a rate hike.
Hungary's forint <EURHUF=> rose 0.3 percent and consolidated
above 270 per euro, gaining as the prospect of interest rate
cuts following personnel changes at the central bank recedes. It
is the region's top-performing currency in 2011, mainly on hopes
that the government will carry out ambitious fiscal reforms.
Romania's leu <EURRON=> rose 0.2 percent to 4.099 per euro,
trimming its previous slight losses. Dealers say the unit is
likely to appreciate further, with a target seen at around 4.0
against the common currency.
Stocks nudged higher across the region, led by the Budapest
bourse <>, which rose 0.5 percent.
On the bond market, Polish papers were stable on Thursday,
while Hungary's bonds strengthened, tracking the forint, with
yields falling some 4-5 basis points across the curve.
Hungary sold a total of 65 billion forints worth of bonds,
20 billion forints more than previously planned.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.387 24.394 +0.03% +2.51%
Polish zloty <EURPLN=> 4.02 4.032 +0.3% -1.54%
Hungarian forint <EURHUF=> 268.2 269.01 +0.3% +3.65%
Croatian kuna <EURHRK=> 7.383 7.38 -0.04% -0.04%
Romanian leu <EURRON=> 4.099 4.106 +0.17% +3.27%
Serbian dinar <EURRSD=> 103.25 103.317 +0.06% +2.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 8bps over bmk*
7-yr T-bond CZ7YT=RR -4 basis points to +65bps over bmk*
10-yr T-bond CZ9YT=RR 0 basis points to +68bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +334bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +327bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -6 basis points to +481bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +457bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +401bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1122 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Sam Cage and Reuters bureaus; editing by Stephen
Nisbet)
