* Forint leads FX gains helped by stronger euro/dollar
* Correction seen short-lived as uncertainty looms
By Marius Zaharia
BUCHAREST, July 20 (Reuters) - The forint rose after recent
heavy losses on Tuesday but analysts said it and other Hungarian
assets looked set to fall further as rattled markets continue to
trade on the country's dispute with international lenders.
A bounce in the euro against the dollar early on Tuesday was
the main trigger for a correction after the forint fell over 3
percent on Monday to hit levels last seen in April 2009, but the
unit may test even weaker levels later this week, dealers said.
Analysts have said the government is likely playing tough
with international lenders to prove itself to its voter base
ahead of local elections due on Oct. 3 and would probably reach
an agreement the IMF and the EU eventually. []
But markets may not wait until then. Danske Bank said in a
morning note a selloff in Hungarian assets could gain further
momentum in the coming weeks and technically it was hard to see
much resistance to further forint weakness.
"We corrected a bit from yesterday, partly on the EUR/USD.
but there will be no serious correction until the government
comes out and calms markets again," one dealer in Budapest said.
"We might be in for a prolonged period of uncertainty."
At 0726 GMT, the forint <EURHUF=> was up 0.4 percent from
Monday's close to 289.51 per euro. The Czech crown <EURCZK=> and
the Polish zloty <EURPLN=> were 0.2-0.3 percent stronger while
the Romanian leu <EURRON=> was flat.
Markets in Poland, the Czech Republic and Romania showed on
Monday they had enough strength to decouple from Hungary's
problems as long as they remained on the austerity path.
Hungary's central bank kept interest rates at 5.25 percent
on Monday, but made clear it was ready to intervene in currency
markets to defend the forint, adding it may also raise interest
rates if needed [].
Some players in the market were already pricing in higher
rates and pressure on Hungarian yields will likely remain on the
upside, especially at the short end of the curve.
Without a deal Hungary, which runs central Europe's highest
public debt at about 80 percent of gross domestic product, will
not be able to use remaining funds in its 20 billion euro loan
secured in 2008.
It is not under immediate financing pressure, but the deal
is a credibility anchor for foreign investors that helps to keep
funding costs under control.
In Poland, the central bank releases net inflation data at
1200 GMT but the figure is likely to have little market impact.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.287 25.332 +0.18% +4.08%
Polish zloty <EURPLN=> 4.117 4.131 +0.34% -0.32%
Hungarian forint <EURHUF=> 289.51 290.76 +0.43% -6.62%
Croatian kuna <EURHRK=> 7.217 7.208 -0.12% +1.28%
Romanian leu <EURRON=> 4.259 4.259 0% -0.51%
Serbian dinar <EURRSD=> 105.02 104.78 -0.23% -8.7%
All data taken from Reuters at 0826 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia;
Editing by John Stonestreet)
