* Zloty leads gains after fall on Monday
* Dealers say rally to be short-lived
(Adds dealer, updates prices)
By Michael Winfrey and Jana Mlcochova
PRAGUE, April 19 (Reuters) - Investors drove up central
European currencies on Tuesday in bargain hunting a day after
Standard & Poor's cut its U.S. ratings outlook to negative and
pushed the region's markets lower.
But investors took a cautious line as euro zone debt
concerns remained in their sights, saying they did not know how
long the bullish trend would last.
The Polish zloty led the pack with a 0.35 percent rise,
followed by the Hungarian forint which added 0.27 percent and
the Czech crown, which was up by 0.18 percent.
A Prague-based dealer said Monday's weakness signalled a
flight from risk.
"I believe risk reduction will continue," the dealer said.
"The rise in the crown is understandable. It's seen as safe
haven..., but the zloty is merely correcting yesterday's losses
and the forint has a strong resistance level at 268 (per euro),"
he added.
"After all people do distinguish how each country is doing."
Hungary's central bank left rates unchanged at 6 percent on
Monday, and persistent inflation has caused many analysts to
reverse expectations that four new members of the central bank's
policy board, who are supportive of the government's pro-growth
plan, will push for rate cuts in the near term.
The Polish zloty <EURPLN=D2> rose 0.35 percent, following a
1 percent fall on Monday, although dealers were cautious as to
whether the trend would persist.
"The global situation will be most important. We have to
observe the euro/dollar and American bonds," said BRE Bank
foreign exchange dealer Andrzej Bowtruczuk.
"If global stock markets react calmly I would not expect a
significant weakening of the zloty."
CZECH POLITICAL CRISIS RESOLVED FOR NOW
The Czech crown gained 0.2 percent after the three parties
in the centre-right ruling coalition agreed to reshuffle the
cabinet and avert collapse in the wake of a corruption and
conspiracy scandal. []
Bolstered by the government's efforts to balance the budget
by 2016 and rein in public debt, the crown had largely shrugged
off the row to enjoy a safe-haven status in a region where other
countries have struggled to control public finances.
Investors said that trend may not last.
"Yesterday's (level of) flow of bad news will probably not
continue," bank CSOB said in a report. "That could take the wind
out of the sails for the crown, which has recently been behaving
like a safe-haven asset."
Romania's leu was virtually flat. Dealers and analysts say
the country's central bank is comfortable with the currency's
gain of more than 3 percent this year because it eases the
impact of higher energy and commodity prices and lessens the
need to raise interest rates.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2011
Czech crown <EURCZK=> 24.118 24.163 +0.19% +3.66%
Polish zloty <EURPLN=> 3.974 3.992 +0.45% -0.4%
Hungarian forint <EURHUF=> 267.12 267.95 +0.31% +4.07%
Croatian kuna <EURHRK=> 7.357 7.359 +0.03% +0.31%
Romanian leu <EURRON=> 4.088 4.091 +0.07% +3.55%
Serbian dinar <EURRSD=> 101.09 101.4 +0.31% +4.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -7 basis points to -9bps over bmk*
7-yr T-bond CZ7YT=RR -5 basis points to +50bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +65bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1151 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Editing by John Stonestreet)
