* Forint extends bounce off 1-year low, stocks rise
* Markets await Hungary's action plan after Greece comments
* Trade choppy, to stay volatile
PRAGUE, June 8 (Reuters) - The forint extended a rebound on
Tuesday and Hungarian stocks rose as investors awaited details
of a government action plan designed to calm fears the country's
finances were out of control.
Hungarian Prime Minister Viktor Orban was due to speak later
in the day. His government already pledged on Monday to cut
spending and hold the budget deficit near the 3.8 percent of
annual economic output target agreed with lenders.
Analysts and dealers expect choppy trade ahead after last
week's government comments suggesting that Hungary was close to
a Greek-style debt crisis, which dragged down central Europe and
hit global assets like the euro and oil. []
The forint <EURHUF=> bid 0.2 percent up at 284.22 per euro
by 0719 GMT, leading gains in central Europe and moving more off
a one-year low hit on Friday. Bond yields dropped up to 5 basis
points on the long-end before a treasury bill sale at midday.
The Polish zloty <EURPLN=> rose 0.1 percent and Romania's
leu <EURRON=> 0.3 percent. The Czech crown <EURCZK=> was flat.
Orban was due to outline details from an economic action
plan in a speech in Parliament at 13:00 local time (1100 GMT).
"At these levels, clients are more willing to sell (euro vs
forint), but activity is very low," a dealer said in Budapest.
"We await the Orban speech, but don't expect miracles form
it. The forint is rather vulnerable, it will not be nearly as
easy to calm investors as it was to send the forint into a
nosedive with a couple of ill-advised comments."
Budapest stocks <> rose 1.5 percent in early trade, led
by the country's leading bank OTP <OTPB.BU>, up 4 percent.
On Tuesday, news portal Index reported Hungary's government
has likely abandoned the idea of channelling private pension
funds into the state budget as a form of raising revenues due to
opposition from the IMF and the European Union.
But citing several unnamed sources, Index said the
government would most probably go ahead with a plan to impose
some kind of special tax on banks' profits. []
NOT GREECE
While analysts say Hungary's debt woes are far less serious
than those of Greece and fund investors have yet to flee Hungary
and central Europe entirely, the region was unlikely to recover
quickly and trade would stay volatile. []
"We reiterate our opinion that markets previously
overreacted," SEB said in a trade note, in which it also
recommended buying a euro/zloty put spread, expecting the Polish
unit to trade in a 3.84-4.2 per euro range.
"With volatility likely to remain elevated in the near term
but given the fundamentally unjustified contagion from Hungary
to the zloty and our bullish view on the zloty in the medium-
and long-term we released (the) recommendation," it said.
The International Monetary Fund chief and euro zone finance
ministers downplayed market fears on Monday. []
Fund managers said on Monday Hungarian politicans were
clumsy in their attempts to warn voters of austerity measures,
but said comments were designed for a domestic audience.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.998 26.00 +0.01% +1.23%
Polish zloty <EURPLN=> 4.141 4.145 +0.1% -0.89%
Hungarian forint <EURHUF=> 284.22 284.9 +0.24% -4.88%
Croatian kuna <EURHRK=> 7.254 7.252 -0.03% +0.76%
Romanian leu <EURRON=> 4.222 4.235 +0.31% +0.36%
Serbian dinar <EURRSD=> 103.44 103.31 -0.13% -7.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 161bps over bmk*
7-yr T-bond CZ7YT=RR 0 basis points to +173bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +168bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 0923 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; editing
by Jason Webb)
