* Zloty leads FX down despite rising stocks
* Zloty, Polish bonds hit by worries over 2010 deficit
(Adds fixed income, detail)
By Dagmara Leszkowicz
WARSAW, Sept 10 (Reuters) - Poland's zloty led losses by
central Europe's main currencies on Thursday, shedding more than
1 percent despite stronger stocks and the falling dollar,
prompting dealers to look to coming sessions to show why the
region's link with euro-dollar has been broken.
At 0903 GMT the zloty <EURPLN=> was down 1.3 percent at 4.17
against the euro while the forint <EURHUF=> was 0.7 percent
weaker to the single currency.
Only the Czech crown <EURCZK=> bucked the trend, rising
slightly to 25.423 against the euro.
"We lost the link between rising euro-dollar and the region,
and the problem is no one knows why," said Lutz Karpovitz, FX
strategist at Commerzbank.
"Usually when equity markets are strong and euro-dollar goes
up it supports region's units, and it did not happen this time."
Stocks in the Central and Eastern Europe were firmer, with
signs of a better global economic outlook boosting emerging
assets.
The U.S. dollar dropped to a year low on Wednesday as
investors shunned it for gold, although it trimmed some of its
losses against the euro after a Federal Reserve report said
labour market conditions at the end of August remained weak and
retail sales were flat. []
BUDGET WORRIES
With the region hit by the global recession, most
governments are battling widening budget gaps, boosted by
falling revenues.
On Wednesday, the Czech government approved a 2010 budget
draft with the widest-ever deficit, fuelled by the crisis and
the refusal of the main political players to cut spending before
an election. []
Poland's government approved a budget bill for 2010 on
Tuesday with the highest deficit in 20 years.
Dealers said the budgetary situation affected bonds as well
as currencies, with yields rising 4-6 points across the curve
for the fourth consecutive day.
"Yields are up due to worries over budget and the zloty is
also not very supportive," said one Warsaw-based dealer.
In Poland's first bond tender since the budget approval the
finance ministry sold 1.1 billion zlotys in 5-year bonds, with
demand half that in a similar tender on Aug. 12. []
Hungary's bond auctions, by contrast, drew healthy demand
on Thursday and the government sold 47 billion forints worth of
bonds, 5 billion forints more than planned. []
"The amounts are lower (than in in Poland) and the yields
are higher," one trader said. The yields set at the auctions,
however, were slightly higher than secondary market levels
before the auctions.
In Romania, the statistics office said annual inflation
slowed to 5 percent last month from July's 5.1 percent, below
market expectations of 5.2 percent.
The Romanian central bank governor said on Wednesday the
bank would have enough room for any moves in monetary policy for
the next four months as consumer prices are facing a "good
chance" of meeting this year's target. []
Romania's leu <EURRON=> was relatively stable to traded at
4.247 against the euro
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.423 25.462 +0.15% +5.23%
Polish zloty <EURPLN=> 4.169 4.112 -1.37% -1.3%
Hungarian forint <EURHUF=> 272.73 270.84 -0.69% -3.37%
Croatian kuna <EURHRK=> 7.324 7.339 +0.2% +0.56%
Romanian leu <EURRON=> 4.247 4.245 -0.05% -5.48%
Serbian dinar <EURRSD=> 93.17 93.301 +0.14% -3.96%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +9 basis points to 201bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +177bps over bmk*
10-yr T-bond CZ10YT=RR -5 basis points to +175bps over
bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +397bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +343bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +286bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +631bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +567bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +489bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1003 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Dagmara Leszkowicz,
editing by Victoria Main)
