* Zloty up on governor's rate comments
* Polish bonds down, 2-year papers hit most
* Romania leaves rates flat, as expected
(Adds Romania's decision on rates)
By Dagmara Leszkowicz
WARSAW, Jan 5 (Reuters) - The Polish zloty firmed to
eight-week highs on Wednesday after central bank governor Marek
Belka said for the first time since taking up his post last
summer it was time for Warsaw to begin monetary tightening.
Belka told Reuters in an exclusive interview that it was
time for Polish interest rates to move gradually higher to help
strengthen the zloty and cap inflation expectations.
[]
"The time for observing the situation in monetary policy is
ending. I definitely believe that rates should be raised
pre-emptively, not just in case," he said.
Poland's 10-strong Monetary Policy Council has kept the key
interest rate at a record low of 3.5 percent over the last 18
months and analysts expect the bank to raise borrowing costs
soon, although they are split over the exact timing of a hike.
By 1024 GMT the zloty <EURPLN=> was 0.8 percent stronger at
3.90, a touch off an earlier high of 3.885, with traders
ascribing the move to Belka's comments.
By contrast, Polish bonds weakened on Wednesday, with yields
up some 11 basis points at the short-end of the curve on the
expectations of quick interest rate increases.
"Belka strengthened the zloty," said one Warsaw-based
dealer. "I guess it may move in a band of around 3.89-3.92
today."
Belka voted against a proposed 50 basis point rate hike in
August -- the last month for which individual voting records
have been published -- and is widely regarded as a moderate
member of Poland's 10-strong rate-setting committee.
Analysts said his comments may mean interest rate rises will
be delivered sooner than had been expected.
Polish 3x6 forward rate agreements <PLNFRA> -- which show
where markets see rates in future -- jumped more than 10 basis
points on Wednesday and now are pricing in a rise of 54 basis
points in the next three months.
The Czech crown <EURCZK=> had added some 0.1 percent by 1024
GMT, while Hungary's forint <EURHUF=> eased some 0.3 percent.
ROMANIA'S RATES FLAT
Elsewhere, Romania's central bank left interest rates
unchanged at 6.25 percent -- in line with forecasts -- as high
inflation kept rate-setters cautious despite the economy
laggging its regional peers.[]
Romania's leu <EURRON=> was 0.1 percent stronger on
Wednesday morning, with dealers saying the decision to leave
rates unchanged had been already priced in.
A Romanian newspaper reported on Wednesday that the
country's budget deficit stood at 6.6 percent of gross domestic
product last year, slightly less than its 6.8 percent IMF-agreed
target. []
Under a 20 billion euro bailout led by the International
Monetary Fund, Romania implemented drastic spending cuts to rein
in a bulging fiscal shortfall last year and must cut the deficit
further to 4.4 percent of GDP in 2011.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.847 24.871 +0.1% +0.62%
Polish zloty <EURPLN=> 3.906 3.937 +0.79% +1.33%
Hungarian forint <EURHUF=> 276.76 275.96 -0.29% +0.44%
Croatian kuna <EURHRK=> 7.386 7.362 -0.32% -0.08%
Romanian leu <EURRON=> 4.266 4.27 +0.09% -0.77%
Serbian dinar <EURRSD=> 106.56 106.46 -0.09% -0.59%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -10 basis points to 95bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +94bps over bmk*
10-yr T-bond CZ9YT=RR +5 basis points to +107bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +11 basis points to +417bps over bmk*
5-yr T-bond PL5YT=RR +10 basis points to +388bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +329bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +660bps over bmk*
5-yr T-bond HU5YT=RR +8 basis points to +597bps over bmk*
10-yr T-bond HU10YT=RR +7 basis points to +498bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1124 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz,
Editing by Catherine Evans)
