* FX move sideways, zloty eases after sharp gains
* Hungary bond auctions seen attracting good demand
* ECB rate decision, U.S. payroll data in focus
By Marton Dunai
BUDAPEST, July 2 (Reuters) - East European currencies took a
breather on Thursday after sharp gains the previous session,
with markets slowing before an ECB rate decision and U.S.
payroll data later in the day.
The Polish zloty was slightly weaker while the Czech crown
and the Hungarian forint were broadly steady as the region
slipped back into ranges.
Regional stock markets were all weaker, following core
markets.
Regional currencies were expected in tight ranges, with the
forint seen between 268 and 272 to the euro, and the crown
between 25.60 and 25.80, dealers said.
"We are treading water around these levels now but I think
we will see further gains in the forint, but at a slower pace
than what we have seen in the past two days," a Budapest-based
currency dealer said.
"Technically, the forint could rise to 265," he added.
The zloty, however, was seen as a potential outperformer,
even though by 0833 GMT bid down 0.16 percent at 4.37 per euro.
The crown was trading at 25.66 to the euro, a whisker
firmer, while the forint was stuck on the strong side of 270,
pierced on Wednesday.
"A path to further strengthening (of the zloty) lays open,"
BPH analysts wrote in a daily note. Optimism on global equity
markets and potentially favourable U.S. unemployment data could
help the zloty to strengthen to 4.30 against euro," they added.
The zloty, which outperformed the region on Wednesday but
has shed the most in the past year, losing around a quarter of
its value, could maintain an edge, Unicredit said in a note.
"Although we're not that convinced by recent Polish fiscal
news flow, long-end bond market sentiment has at least
temporarily improved, which coupled with undeniably stretched
PLN/CEE crosses should allow some PLN catch-up," Unicredit said.
Trading could be busy ahead of the U.S. long weekend,
dealers said, and the crown especially could see some brisk
trading as Czech markets are closed on Monday.
Dealers in Prague say the crown is overvalued. Czech central
bank governor Tuma, however, said current gains still left the
crown below recent highs, which helps the economy.
"(Tuma's) comments clearly indicate that recent CZK gains
are not problematic for the CNB and therefore the current CZK
level would not be a decisive element in monetary policy
decision if current levels remain," Danske Bank said in a note.
The Hungarian bond market was quiet ahead of bond auctions
by the government later in the day, which traders said were
expected to be sold smoothly.
"There will be demand for the papers ...I think the debt
agency is too cautious (and could raise offers)," a trader said.
The debt agency AKK is offering more bonds on Thursday than
in previous weeks<HUISSUE>, as it is gradually raising offers,
but the amounts offered -- 10 and 7 billion forints - are still
way below the usual amounts of around 50 billion per series sold
prior to last autumn's market crisis.
Expectations for a central bank interest rate cut are
supporting the Hungarian bond market, the trader said.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.66 25.691 +0.12% +4.26%
Polish zloty <EURPLN=> 4.37 4.363 -0.16% -5.84%
Hungarian forint <EURHUF=> 269.35 269.46 +0.04% -2.15%
Croatian kuna <EURHRK=> 7.27 7.285 +0.21% +1.31%
Romanian leu <EURRON=> 4.194 4.191 -0.07% -4.28%
Serbian dinar <EURRSD=> 93.13 93.277 +0.16% -3.92%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +1 basis points to 153bps over bmk*
4-yr T-bond CZ4YT=RR -29 basis points to +152bps over bmk*
8-yr T-bond CZ8YT=RR +1 basis points to +301bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -4 basis points to +383bps over bmk*
5-yr T-bond PL5YT=RR -1 basis points to +325bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +283bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -28 basis points to +756bps over bmk*
5-yr T-bond HU5YT=RR -59 basis points to +692bps over bmk*
10-yr T-bond HU10YT=RR -47 basis points to +600bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1031 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai)
