(Adds details, fixed income)
PRAGUE, Sept 26 (Reuters) - Emerging European currencies
dipped against the euro on Friday, but stuck to tight ranges as
investors watched for further news on a bailout plan which U.S.
lawmakers failed to agree on overnight.
The Polish zloty <EURPLN=> headed 0.6 percent lower by 0826
GMT, trading at 3.354 to the euro after breaking above the
technical 3.33 level.
Investors have been most bullish on the zloty due to
Poland's pledge to ready itself for the euro by 2011, likely
adopting the currency a year later, and analysts expect further
monetary policy tightening to help ease inflation running nearly
double the central bank's target.
But dealers said a break above technical levels left the
currency open to temporary weakening.
"The zloty should in general be strengthening," a Warsaw
foreign exchange dealer said.
Currency movements in the region were relatively subdued
after this week's sharp weakening as risk appetite soured while
U.S. lawmakers wrangle over the $700 billion financial rescue
plan.
The Czech crown <EURCZK=> rose 0.2 percent at 24.373 per
euro and the Hungarian forint <EURHUF=> dipped 0.1 percent to
240.4 per euro.
Dealers said regional markets were slowly getting back to
"business as usual" after sharp swings in recent weeks as the
year-old global credit crunch reached new levels.
"The market went up a lot yesterday and saw big selling
interest," a Prague trader said. "We still see some natural
flows."
The Czech central bank left interest rates unchanged on
Thursday, following similar moves by the Polish and Romanian
banks. Hungary's central bank is seen holding fire on interest
rates when it meets on Monday.
Regional economies have started to slow, hurt by a slowdown
in demand from a cooling euro zone economy, but central European
financial markets have been for the most part insulated from
global credit woes.
On Friday, government bonds were steady in Poland, while
Hungary's bonds continued to ease as a global liquidity crunch
kept the appetite of foreign investors for risky emerging market
assets low.
After steep falls in past weeks, dealers say some bounce is
possible although foreign funds typically use any price rebound
as an opportunity to close positions, focussing on asset swaps
instead where cash is not needed.
"Fundamentals are disregarded while global liquidity is low,
I expect the market to remain volatile and the direction is a
weakening (one)," one Budapest-based trader said.
Elsewhere in the region, Romania's leu <EURRON=> inched down
from Thursday's domestic close to 3.678 to the euro and Serbia's
dinar <EURRSD=> lost 0.1 percent to 76.43 per euro.
Croatia's kuna <EURHRK=> was unmoved at 7.105 after a boost
on Thursday from a central bank move to tighten rules on
mandatory reserves [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.373 24.430 +0.23% +8.02%
Polish zloty <EURPLN=> 3.354 3.335 -0.57% +6.85%
Hungarian forint <EURHUF=> 240.390 240.120 -0.11% +4.93%
Croatian kuna <EURHRK=> 7.105 7.106 +0.01% +3.02%
Romanian leu <EURRON=> 3.678 3.675 -0.08% -2.73%
Serbian dinar <EURRSD=> 76.430 76.338 -0.12% +2.96%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +1 basis points to 3bps over bmk*
5-yr T-bond CZ5YT=RR 0 basis points to +1bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +26bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +9 basis points to +254bps over bmk*
5-yr T-bond PL5YT=RR +11 basis points to +206bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +163bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +545bps over bmk*
5-yr T-bond HU5YT=RR +16 basis points to +508bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +373bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1026 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham)
