* Zloty leads modest FX gains as markets eye key EUR level
* Bonds mixed as investors worry output gains won't last
* Romania growth outlook sours after tax hikes, wage cuts
(Adds bonds, new comments, updates markets)
By Sandor Peto and Marton Dunai
BUDAPEST, July 9 (Reuters) - Central European currencies
extended this week's gains on Friday on sustained global risk
appetite, but debt markets were mixed as a recent rally petered
out and medium-term economic prospects remained uncertain.
Asian stocks rose overnight and the euro gained, while Czech
industry output data followed in the footsteps of Poland and
Hungary, posting a strong increase in May. []
Poland's zloty <EURPLN=> added a third of percent to trade
near two-week highs, while the Hungarian forint <EURHUF=> was a
quarter of a percent stronger and the Czech crown <EURCZK=>
edged up 0.2 percent.
But Romania's leu <EURRON=> dipped, giving up 0.3 percent.
The weakness might reflect a lack of direct support from the
central bank, which has often intervened in Romanian markets,
one analyst said.
"We have noted that the assumed central bank presence in the
FX space seems to be fading and market players may take this as
a hint to sell the (leu)," said ING economist Vlad Muscalu.
The market also kept a close eye on the euro/dollar cross
<EUR=>, which was fluctuating around the key 1.27 level.
In Hungary, bonds stemmed a recent rally. The curve began to
steepen as the short end was still being bid, while offers
dominated the longer maturities.
In Poland, bonds were flat. The country's first dollar bond
issue went smoothly on Thursday, all $1.5 billion of 5-year
paper being sold. []
The region's strong output figures were offset by concerns
that a possible slowdown in the euro zone in the second half of
2010 could curb export growth once again, analysts said.
"External factors will be important in today's trade, which
means (investors will eye) whether the positive mood in the past
two days favouring riskier assets lasts," said Lukas Ruzicka, an
FX dealer at J&T Banka.
A Reuters poll of analysts showed on Thursday that the
region's currencies could firm in the next 12 months, led by the
zloty <EURPLN=> which was seen surging by about 8 percent.
[]
"If the euro can hold its own north of 1.27 versus the
dollar, we could finally break through the (EUR/HUF) 280 level
as well," a dealer in Budapest said.
"We've been toying with those levels all morning so I think
we could break through today. It's just a matter of time."
ROMANIA OUTLOOK SOURS
Romanian markets returned to a weakening path, no longer
trading on the International Monetary Fund's approval on the
disbursement of the latest tranche of the country's 20 billion
euro bailout deal.
Prospects for the recession-hit economy have significantly
worsened after cuts in public wages and a hike in value added
tax and analysts now expect gross domestic product to shrink by
a further 2.5 percent in 2010. []
While June inflation due on Monday is expected to remain
within the central bank's target band, the VAT hike should push
prices significantly higher later this year, subdue local demand
and prolong recession.
Poland's new central bank Governor Marek Belka, meanwhile,
projected 3 percent growth for 2010 and 3.5 percent for 2011.
His forecasts, though robust, were below earlier projections by
the bank and the government. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.367 25.411 +0.17% +3.75%
Polish zloty <EURPLN=> 4.074 4.087 +0.32% +0.74%
Hungarian forint <EURHUF=> 280.09 280.8 +0.25% -3.48%
Croatian kuna <EURHRK=> 7.186 7.19 +0.06% +1.71%
Romanian leu <EURRON=> 4.24 4.227 -0.31% -0.06%
Serbian dinar <EURRSD=> 103.74 103.69 -0.05% -7.58%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -14 basis points to +88bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +130bps over bmk*
10-yr T-bond CZ9YT=RR -4 basis points to +125bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -6 basis points to +393bps over bmk*
5-yr T-bond PL5YT=RR -5 basis points to +368bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +317bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +588bps over bmk*
5-yr T-bond HU5YT=RR -2 basis points to +559bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1140 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto; Editing
by Toby Chopra)
