* FX tracks EUR/USD, forint leads gains on govt plan details
* Polish, Romanian cbanks keep rates on hold
* Government bonds firm, stocks mixed
(Updates with Hungary minister, Poland cbank, new comments)
By Jason Hovet/Sandor Peto
PRAGUE/BUDAPEST, June 30 (Reuters) - The forint got a late
boost on Wednesday from details of the Hungarian government's
economic plans, underpinning the gains of Central European
assets after a rollercoaster day.
The Polish and Romanian central banks kept interest rates on
hold, and the European Union's emerging markets were buoyed by a
European Central Bank liquidity tender that lifted the euro
<EUR=>, the region's reference currency. []
A dip in the euro in afternoon trade trimmed currency gains
in the region, but comments from Hungarian Economy Minister
Gyorgy Matolcsy about details of the government's economic plans
gave the forint renewed momentum.
The plans include spending cuts and a tax on banks. The
minister also said the government planned a state fund to help
households whose repayments have been boosted by a sharp fall in
the forint against the Swiss franc in past weeks.
"Finally some concrete news from the government itself. On
balance, this should help calm sentiment and support the forint,
especially as the government is not rocking the boat any more
and there are no real new surprises," said Simon Quijano-Evans,
analyst at Chevreux in a note.
"(I) look for positive spillover into other FX in the
region," he added.
The forint <EURHUF=> gained half a percent against the euro
after the comments, and by 1559 GMT it was 0.9 percent firmer
from Tuesday at 284.59.
Romania's leu <EURRON=> firmed 0.6 percent to 4.361, getting
a lift following sharp losses in recent weeks, after the
Romanian central bank kept its main interest rate on hold.
[]
The Polish zloty <EURPLN=> gained 0.5 percent and the Czech
crown <EURCZK=> firmed 0.3 percent.
The Polish central bank also kept rates on hold at 3.5
percent as expected, and its statement did not mention its
informal neutral bias for the first time in many months,
reflecting a more hawkish attitude. [] []
Government bonds firmed in the region, with yield spreads
over corresponding Bunds dropping as much as 13 basis points.
But the region's key equity indices were mixed, with stocks
in Budapest <> and Bucharest <> rising 2.0 and 2.2
percent, respectively. Warsaw stocks <> shed 0.2 percent
and Czech shares <> lost 0.9 percent.
SWISS FRANC, FISCAL ISSUES ON WATCH
The region's markets are supported by relatively high
interest rates, but international risk sentiment is the key
driving force and that remains tightly linked to news about the
European debt crisis and economic recovery, dealers said.
While the forint snapped a six-day losing streak, it remains
volatile as investors eye its deep losses against the Swiss
franc in past weeks and the impact on households' foreign
currency loans.
It was bid at 214.90 versus the franc <CHFHUF=> at 1614 GMT.
For a graphic on Hungarian forint, click on:
http://graphics.thomsonreuters.com/gfx/ST_20103006102544.jpg
For a graphic on forint vs Swiss franc and Hungarian CDS:
http://graphics.thomsonreuters.com/gfx/ST_20103006114403.jpg
Central European governments have struggled to convince
investors they can stick to their fiscal plans, with economic
recoveries fragile and debt problems plaguing the euro zone.
The International Monetary Fund gave a strong signal on
Tuesday that it was set to release further aid for Romania,
allaying concern that the deal could be derailed after a court
last week ruled against part of the government's cost-cutting
plans.
The Romanian central bank appeared to have stopped its rate
easing cycle on Wednesday, holding the main interest rate at
6.25 percent as expected, after the leu weakened sharply when
the government hiked the value-added tax by 5 percentage points
to 24 percent to meet IMF aid requirements. []
"The decision is what was supposed to happen given political
instability and the risks to the inflation outlook," said
Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank.
"Looking forward, I believe the central bank will wait to
see to what extent the VAT hike is reflected in prices, and
based on that we might see either rates on hold at the current
level or even hikes." []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.658 25.749 +0.35% +2.57%
Polish zloty <EURPLN=> 4.122 4.144 +0.53% -0.44%
Hungarian forint <EURHUF=> 284.59 287.17 +0.91% -5%
Croatian kuna <EURHRK=> 7.193 7.195 +0.03% +1.62%
Romanian leu <EURRON=> 4.361 4.388 +0.62% -2.83%
Serbian dinar <EURRSD=> 104.46 104.38 -0.08% -8.21%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -12 basis points to 119bps over bmk*
7-yr T-bond CZ7YT=RR -13 basis points to +156bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +140bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -11 basis points to +422bps over bmk*
5-yr T-bond PL5YT=RR -8 basis points to +396bps over bmk*
10-yr T-bond PL10YT=RR -6 basis points to +329bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -7 basis points to +641bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +595bps over bmk*
10-yr T-bond HU10YT=RR -4 basis points to +510bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1759 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet and
Sandor Peto; editing by Patrick Graham, Ruth Pitchford and Toby
Chopra)
