* Czech inflation surprises on downside, CZK little changed
* Czech central bank seen in no hurry to hike rates
* Polish, Czech bond auctions well-bid, Hungary auction eyed
(Adds bonds, updates markets)
By Krisztina Than and Marton Dunai
BUDAPEST, March 9 (Reuters) - Emerging European currencies
weakened slightly on Wednesday, with the Czech crown in focus
after weak inflation data dampened expectations that policy
makers in Prague would hurry to tighten interest rates.
Investors put pressure on the crown after annual inflation
in the Czech Republic came in at 1.8 percent, below expectations
for 2 percent. []
"The Czech Republic does not necessarily have to follow
Hungary or Poland, where rates have already risen," said Patria
Finance chief economist David Marek. "Inflation pressures ...
will be pressures only from external factors."
The central bank was quick to say the price increase was
lower due to food prices, the same as a month before, and that
the figure would not alter its overall forecast. []
Markets had raised bets in the past week that Czech rates
would start rising by mid-2011 from a historic low of 0.75
percent after the European Central Bank unexpectedly signalled a
euro zone rate rise could come as early next month.
By 1251 GMT, the crown <EURCZK=> had dipped less than 0.1
percent against the euro to trade at 24.245. Hungary's forint
<EURHUF=> and the Polish zloty <EURPLN=> had each eased about a
quarter of a percent, while the Romanian leu <EURRON=> was flat.
Risk appetite was weaker as the euro zone debt crisis came
back into focus ahead of a European Union summit later this
week, although euro zone leaders were not expected to reach a
breakthrough to quell the region's debt crisis.
"It looks like risk-off at the moment," a Prague dealer
said. "There is some risk aversion due to (credit default swap)
prices rising for Portugal and some talk of Greece problems."
BONDS QUIET
The region's bond markets were quiet after a pair of
well-bid auctions in Poland and the Czech republic.
Poland's finance ministry placed 4.5 billion zlotys in
2-year bonds amid strong demand, and investor interest was
strong at a Czech 11-year bond auction as well.
Hungary will also offer government bonds on Thursday, and
investors will be looking for clues on the strength of demand at
the tender, the first since the government's new fiscal measures
and the appointment of two new monetary policy-setters.
"The inflation data on Friday will figure in the auction for
sure," a dealer said in Budapest. "The previous release caused a
positive surprise but external factors will drive the headline
up sooner or later; the question is when investors react."
Hungary will publish inflation data on Friday, with prices
seen rising by an annual 4.2 percent <HUCPIY1> after a 4 percent
increase in January. []
Analysts said the central bank -- which increased its key
rate by 75 basis points from November to January but held it
steady last month -- was likely to leave it unchanged at the
current 6 percent for the next few months.
The bank will publish the main figures from its inflation
report, as well as updated forecasts, after a meeting on March
28 when the two new rate setters who were elected on Monday join
the central bank's Monetary Council for the first time.
Both took a cautious line on policy in their first remarks
on Monday. []
Hungary's reform programme to cut spending and debt assumes
3-3.5 percent economic growth in 2013, well below earlier
government forecasts, Economy Ministry Secretary of State Andras
Karman told Reuters late on Tuesday. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.257 24.245 -0.05% +3.06%
Polish zloty <EURPLN=> 3.978 3.967 -0.28% -0.5%
Hungarian forint <EURHUF=> 272.93 272.25 -0.25% +1.85%
Croatian kuna <EURHRK=> 7.39 7.4 +0.14% -0.14%
Romanian leu <EURRON=> 4.188 4.188 0% +1.07%
Serbian dinar <EURRSD=> 103.47 103.51 +0.04% +2.37%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR 0 basis points to -15bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +69bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +62bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -3 basis points to +336bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +330bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -1 basis points to +493bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +472bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +415bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1351 CET.
Currency percent change calculated from the daily domestic
close at 1700 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 Krisztina Than; Editing by Hugh Lawson)
