* HUF gains on wider carry trade with expected Polish cut
* ECB's record loan to banks also helps region's FX
* 25 bps Polish rate cut priced in
* OECD forecasts Poland debt close to constitutional limit
(Adds ECB, new comments)
By Marton Dunai
BUDAPEST, June 24 (Reuters) - Hungary's forint led gains
among Central European currencies on Wednesday, benefiting from
an expected improvement in carry trade as Poland gets ready to
cut rates and the ECB gave record loans to banks, traders said.
The forint gained 1.4 percent by 1127 GMT, outpacing
regional peers which added about a third of a percent each.
"(It's) carry trade... The Polish central bank is expected
to cut rates, while there is no rate cut in Hungary, making the
forint even more attractive and you can notice that in the
forint/zloty cross," a Budapest-based currency dealer said.
"The ECB loan is helping (European) emerging markets... the
forint benefits the most because it has been perhaps the most
volatile currency in the region recently," another dealer said.
Other dealers said there were major HUF buyers present in
the market, which also kept a firm eye on Poland's rate decision
due later in the day.
The National Bank of Hungary kept its rates unchanged at 9.5
percent on Monday, the highest in the European Union along with
Romania's. 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. []
In the latest move aimed at getting liquidity flowing and
softening the impact of the crisis, the European Central Bank
lent banks 442.24 billion euros at a flat rate of 1 percent in
its first one-year refinancing operation. []
"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.
DEBT CONCERN SHRUGGED OFF
Earlier 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. []
The OECD also said that it did not expect Hungary's central
bank to lower its key rate before 2010 from the current 9.5
percent level. Analysts expect rates to fall to 8.5 percent by
the end of the year.
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 in an interest rate cut by the
Czech central bank on Thursday, so analysts said the eventual
move is unlikely to affect the crown. []
Romania's leu firmed slightly on the back of a weaker dollar
and a rebound in stocks.
Analysts expect Romania to cut 50 basis points from its 9.5
percent key rate next week.
Dealers said the Romanian central bank is unlikely to favour
sharp cuts despite easing inflation and growing concerns about
recession. The leu has hovered around 4.2 to the euro and ha
been in a 4.1-4.3 range since March.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.12 26.2 +0.31% +2.42%
Polish zloty <EURPLN=> 4.528 4.545 +0.38% -9.12%
Hungarian forint <EURHUF=> 277.9 281.77 +1.39% -5.16%
Croatian kuna <EURHRK=> 7.305 7.292 -0.18% +0.82%
Romanian leu <EURRON=> 4.225 4.233 +0.19% -4.98%
Serbian dinar <EURRSD=> 93.75 93.423 -0.35% -4.55%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +29 basis points to 139bps over bmk*
4-yr T-bond CZ4YT=RR -12 basis points to +166bps over bmk*
8-yr T-bond CZ8YT=RR +16 basis points to +293bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +418bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +347bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +281bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -21 basis points to +807bps over bmk*
5-yr T-bond HU5YT=RR -53 basis points to +764bps over bmk*
10-yr T-bond HU10YT=RR -46 basis points to +682bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1328 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, writing by Marton Dunai;
Editing by Stephen Nisbet)
