(Updates throughout, changes dateline)
BUDAPEST, Oct 3 (Reuters) - Central European currencies
apart from the zloty extended falls against the euro on Friday
but central bankers across the region said their economies were
relatively safe from the world financial crisis.
Romanian central bank Governor Mugur Isarescu said his
bank's prudent policy stance limited the risk of contagion from
the global credit squeeze, echoing comments by Hungarian central
bankers earlier this week.
"There is relatively limited risk of contamination of the
Romanian banking system following current turbulences on world
financial markets," he said in comments released on Friday.
(For details please double click on [])
However, Isarescu added that he expected heightened market
volatility amid the current turmoil.
"(A) potential adverse impact can also show up in our
country," he said. "Among these, I would mention: more
pronounced volatility of the exchange rate, similarly with
tendencies in other countries in the region, given a reduction
in investors' risk appetite for emerging markets."
Romania's leu <EURRON=>, which has fallen 10 percent against
the euro since the start of September, hit a 3-1/2 year low on
Friday of 3.9165, down 2.3 pct over the previous day's close.
Market watchers predict more losses due to a big current
account deficit and Romanian banks' heavy exposure to foreign
currency loans.
"We now see risks of a rise towards old highs of 4.10/4.15
with any retests of 3.80 providing support," said JP Morgan
analyst Miroslav Plojhar. Many analysts said the central bank
could possibly step in to prop up the currency at around 4.10.
In Ukraine the central bank intervened to buy local currency
at 5 hryvnias to the dollar <UAH=> on Friday when the unit also
hit a 3-1/2 year low.
Emerging European currencies have been hammered as global
credit markets have frozen up after the demise of Lehman
Brothers and as investors hoard cash.
The Hungarian forint <EURHUF=> has shed 1.8 percent against
the euro since Sept. 15 -- the day Lehman filed for bankruptcy
protection. The Polish zloty <EURPLN=> has lost 2.9 percent and
Czech crown <EURCZK=> 3.8 percent since then.
Also on Friday, Serbia's central bank intervened to tame
dinar losses after the currency fell 2 percent. "Banks simply
want to make sure they are long in euros because euros will no
longer be cheap to borrow," a senior treasury analyst said.
Dealers said the banking sector in Serbia was well protected
by tough central bank rules and high capital requirements, but
one said it was hard to escape "collective gloom".
DOLLAR INFLUENCE
Bulgarian central bank governor Ivan Iskrov said banks in
southeast Europe were solvent and sound and for the time being
the region experienced only limited and indirect impacts from
the crisis [].
Markets braced for a vote in the U.S. House of
Representatives later in the day which will determine the fate
of a $700 billion U.S. bank bailout package.
On Friday, the Czech crown fell along with the region as
investors rush to buy dollars. "The dollar story will continue,"
said a Prague trader, who added that the U.S. bailout vote was
unlikely to give much relieve. "The mess is here and the market
feels it," the trader said
Bond prices strengthened on the short end, firming a second
day as market speculation about a Czech interest rate cut next
month grows after evidence pointed to the country's economy
slowing more than expected [].
Poland's zloty <EURPLN=> rose modestly on the day, bucking
the trend, despite a survey showing the government's euro
adoption timetable may be overoptimistic.
"Zloty has stabilised for the time being. The outlook now
depends on the situation in the U.S. and the outcome of the vote
on the bailout plan. Further dollar strengthening will likely
weaken the zloty," a dealer with Warsaw-based bank said.
Poland is unlikely to be ready to join the EU's ERM-2
exchange rate grid, a step towards euro zone entry, before 2012
-- the year the government wants to complete the process of
joining the euro, according to a Reuters poll of analysts
[].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.839 24.773 -0.27% +6.26%
Polish zloty <EURPLN=> 3.414 3.424 +0.29% +5.18%
Hungarian forint <EURHUF=> 245.150 244.550 -0.25% +3.05%
Croatian kuna <EURHRK=> 7.118 7.111 -0.10% +2.85%
Romanian leu <EURRON=> 3.894 3.828 -1.72% -8.76%
Serbian dinar <EURRSD=> 77.632 76.748 -1.15% +1.43%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -5 basis points to 27bps over bmk*
5-yr T-bond CZ5YT=RR -4 basis points to +17bps over bmk*
10-yr T-bond CZ9YT=RR +9 basis points to +27bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +286bps over bmk*
5-yr T-bond PL5YT=RR +5 basis points to +238bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +192bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +634bps over bmk*
5-yr T-bond HU5YT=RR +22 basis points to +577bps over bmk*
10-yr T-bond HU10YT=RR +14 basis points to +446bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1547 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Gergely Szakacs)
