* Polish rate cut 25 bps, easing bias stay, but zloty gains
* HUF gains on wider carry trade
* ECB's record loan to banks also helps region's FX
* Poland works on new euro adoption plan
(Adds new comments, updates prices.)
By Marton Dunai
BUDAPEST, June 24 (Reuters) - Hungary's forint led gains
among central European currencies on Wednesday, benefiting from
a perceived improvement in carry trade as Poland cut rates as
expected and the ECB gave record loans to banks, traders said.
The National Bank of Poland announced the expected 25 basis
point cut to 3.5 percent at 1210 GMT, which did not immediately
affect markets as the move was already priced in.
The cut [], and a later pledge that the bank
retains its easing bias [], did not weaken the zloty
<EURPLN=> which even firmed 0.55 percent by 1517 GMT, riding on
the positive mood in the region.
The forint <EURHUF=> gained 1.5 percent, outpacing regional
peers. The Czech crown <EURCZK=> added 0.75 percent and the leu
<EURRON=> 0.3 percent. Stocks rose, also led by Budapest, where
the BUX index <> added 2.5 percent.
"(It's) carry trade," a dealer in Budapest said. "The Polish
central bank... cut rates, while there is no rate cut in
Hungary, making the forint even more attractive and you can
notice that in the forint/zloty cross," a Budapest-based
currency dealer said.
Other dealers said there were major forint buyers present in
the market, playing on the carry.
The National Bank of Hungary kept its rates unchanged at 9.5
percent on Monday, the highest in the European Union along with
Romania's. [] But Romania is expected to cut rates
next week, as is the Czech Republic on Thursday.
In the latest move to get liquidity flowing, the European
Central Bank lent banks 442.24 billion euros at a flat rate of 1
percent. []
"The ECB loan is helping (European) emerging markets... the
forint benefits the most because it has been perhaps the most
volatile currency in the region recently," another dealer said.
ZLOTY, GROWTH WATCHED
Polish central bank governor Slawomir Skrzypek said the
bank's latest inflation forecasts were roughly in line with
expectations. The bank projected 2009 economic growth at between
-0.4 and 1.1 percent, better than some analysts had feared.
Capital Economics said in a note after the rate decision
that the country's economy can contract by 1.5 percent.
Poland, which has a relatively robust domestic demand, is
less hurt by the global crisis than other, more export-reliant
countries in the region, but rate cuts can help its economy.
Ceska Sporitelna analyst Jana Krajcova said in a note that
the Polish central bank would eye both the economic growth
outlook and zloty exchange rate developments in the next months.
"We see the room for one more mild cut in July, from then on
followed by flat rates for the rest of the year," she said.
Later zloty falls may even trigger a rate hike, she added.
Earlier, the European Union gave Poland until 2012 to bring
its budget deficit below the bloc's ceiling [], while
the Polish government said that it would present a new timetable
by early August to adopt the euro. []
Markets shrugged off an OECD forecast warning that Poland's
debt could approach the Maastricht and Polish constitutional
limit of 60 percent of gross domestic product. []
The OECD also said that it did not expect Hungary's central
bank to lower its key rate before 2010 from the current 9.5
percent. Analysts expect rates at 8.5 percent by year-end.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.004 26.2 +0.75% +2.88%
Polish zloty <EURPLN=> 4.52 4.545 +0.55% -8.96%
Hungarian forint <EURHUF=> 277.56 281.77 +1.52% -5.05%
Croatian kuna <EURHRK=> 7.3 7.292 -0.11% +0.89%
Romanian leu <EURRON=> 4.222 4.233 +0.26% -4.92%
Serbian dinar <EURRSD=> 93.81 93.423 -0.41% -4.62%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +31 basis points to 141bps over bmk*
4-yr T-bond CZ4YT=RR +3 basis points to +180bps over bmk*
8-yr T-bond CZ8YT=RR +16 basis points to +294bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +391bps over bmk*
5-yr T-bond PL5YT=RR +4 basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +301bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -17 basis points to +827bps over bmk*
5-yr T-bond HU5YT=RR -54 basis points to +753bps over bmk*
10-yr T-bond HU10YT=RR -46 basis points to +675bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1717 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Reuters bureaux, writing by Marton
Dunai/Sandor Peto; Editing by Stephen Nisbet and Andy Bruce)
