* FX stronger on dollar, Polish rate decision eyed
* OECD forecasts Poland debt close to constitutional limit
(Adds OECD forecast, updates market)
By Marton Dunai
BUDAPEST, June 24 (Reuters) - Central European currencies
traded a tad stronger on Wednesday morning, boosted by the
dollar's weakness, but markets remained focused on Poland's rate
decision due later in the day.
Markets shrugged off a new OECD forecast warning that
Poland's debt could approach the Maastricht and Polish
constitutional limit of 60 percent of gross domestic product,
with the public deficit near 7.6 percent of GDP. []
"The zloty doesn't seem to care (about the OECD report)," a
dealer in Budapest said. "It's all very quiet."
The OECD also said that it did not expect the National Bank
of Hungary to lower its key rate before 2010 from the current
9.5 percent level, already the highest in the European Union
along with Romania's. Most analysts expect multiple cuts this
year.
Currencies gained, with the forint adding 0.7 percent to
trade at 279.65 against the euro, the zloty gaining a quarter of
a percent and the crown, a top performer in recent weeks, flat
as of 0926 GMT.
Poland's central bank is expected to cut its key interest
rate by 25 basis points to 3.5 percent but the move has already
been priced in. []
"The key event today will be the (Polish) rate decision...
as well as the main points from the new inflation projection by
the central bank, i.e. the inflation path and gross domestic
product," Bank BPH wrote in a note.
"In the event of a very pessimistic GDP path... one could
expect downward pressure on the zloty towards 4.60 per euro," it
added
Danske Bank added in a note that the move should be the end
of the easing cycle in Poland.
In Prague, dealers and analysts expected some stabilisation
after a sharp, 3 percent gain by the crown in the past week that
made it one of the best performing global currencies.
"It was a significant move and now the area (of 26.30-40 to
the euro) represents strong resistance; so I expect some
stabilisation," said Jan Vejmelek, head of economy and strategy
research at Komercni Banka.
The market has mostly priced an interest rate cut by the
Czech central bank on Thursday, so analysts said the eventual
move is unlikely to affect the crown. []
"The interest rate differential is not a key mover of the
(crown) exchange rate," Vejmelek said.
Romania's leu firmed slightly on the back of a weaker dollar
and a rebound in stocks.
"Let's wait and see Poland's monetary policy decision, which
carries weight," said a dealer in Bucharest.
Analysts expect Romania to cut 50 basis points from its 9.5
percent key rate next week, leaving Hungary's recession-hit
economy with the highest interest rates in the European Union.
Hungary left its rate unchanged at 9.5 percent on Monday.
Dealers said the Romanian central bank is unlikely to favour
sharp cuts that put the leu currency under pressure, despite the
recent easing in inflation and growing concerns about the depth
of this year's recession.
The leu has been one of the most stable currencies in the
region since March, broadly hovering around 4.2 to the euro and
only in a 4.1-4.3 range.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.189 26.2 +0.04% +2.15%
Polish zloty <EURPLN=> 4.533 4.545 +0.26% -9.22%
Hungarian forint <EURHUF=> 279.75 281.77 +0.72% -5.79%
Croatian kuna <EURHRK=> 7.308 7.292 -0.22% +0.78%
Romanian leu <EURRON=> 4.23 4.233 +0.07% -5.1%
Serbian dinar <EURRSD=> 93.766 93.423 -0.37% -4.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +27 basis points to 137bps over bmk*
4-yr T-bond CZ4YT=RR +2 basis points to +179bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -22 basis points to +806bps over bmk*
5-yr T-bond HU5YT=RR -55 basis points to +762bps over bmk*
10-yr T-bond HU10YT=RR -47 basis points to +681bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1126 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, writing by Marton Dunai;
Editing by Ruth Pitchford/Toby Chopra)
