* Poor U.S. payroll data, dollar gains fuel correction
* Dealers say CEE due for adjustment after heavy gains
* Forint off 6-month high, leads losers
* Hungary bond auction oversubscribed, more auctions ahead
(Updates throughout)
By Marton Dunai and Sandor Peto
BUDAPEST, July 2 (Reuters) - Central Europe's currencies
gave up early gains on Thursday, edging lower due to worse than
expected U.S. data, a broadly firmer dollar and a general
correction after big gains earlier in the week, dealers said.
"This is just a small correction, that's all," a
Budapest-based dealer said. "There was weak U.S. data out today,
the dollar moved stronger and that was enough to turn this
market around."
"But given the recent big gains, this is a perfectly normal
rebound," he added.
U.S. employers cut far more jobs in June than analysts had
expected, dampening hopes of a quick economic recovery and
cutting appetite for riskier emerging market assets.
[]
Stocks across the region were also sharply lower. Budapest's
BUX <> led the way with a 2.7 percent decline while Prague's
PX <> and Warsaw's WIG20 <> were both over 1 percent
weaker.
Dealers added that the European Central Bank's decision to
keep interest rates at a record low of 1 percent, and its
announcement that it would start buying bonds, had little impact
on the market as the decision had been expected. []
Hungary's forint <EURHUF=>, which had hit a six-month high
earlier on Thursday, led the trend by losing 0.82 percent to
271.7 to the euro. The Czech crown, <EURCZK=>, a traditional
safe haven among the region's currencies, fell 0.33 percent from
25.777 to the euro, retreating from a 2009 high reached earlier
this week.
MORE EASING SEEN
Some dealers added Thursday's weak economic data from
overseas could provide the cue for a further weakening in the
coming sessions.
"Together, the (U.S.) data and the correction could create
room to go down again (in coming sessions)," a Prague-based
dealer said. "We needed some correction to put in some
equilibrium levels."
The forint, one of the biggest movers this week, benefited
earlier in the day from heavy demand at a bond auction which is
expected to herald more such offers on a market that was frozen
for months earlier this year. []
"Today's results speak for themselves; there was incredibly
strong demand at the auctions, foreign and domestic players were
both buying and the top-up tender was also sold very well," a
fixed income trader said.
But some traders said the forint could be heading back
toward the 273/274 per euro level before turning again.
"In the longer run, I still expect firming as more and more
players are lining up to play for strengthening," another
currency dealer said. "But before that, this correction is due
and we'll be weakening a bit."
The Polish zloty <EURPLN=> was among the more resilient of
the region's big currencies but dealers said the dollar's move
is bound to affect the Polish market as well.
"The zloty is stuck to the euro/dollar. Risk aversion
strengthens the dollar and this translates into falling
zloty," said Tomasz Niemiec, dealer at Millennium bank.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.777 25.691 -0.33% +3.79%
Polish zloty <EURPLN=> 4.375 4.363 -0.27% -5.94%
Hungarian forint <EURHUF=> 271.7 269.46 -0.82% -3%
Croatian kuna <EURHRK=> 7.297 7.285 -0.16% +0.93%
Romanian leu <EURRON=> 4.205 4.191 -0.33% -4.53%
Serbian dinar <EURRSD=> 93.13 93.277 +0.16% -3.92%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +9 basis points to 161bps over bmk*
4-yr T-bond CZ4YT=RR -13 basis points to +169bps over bmk*
8-yr T-bond CZ8YT=RR +10 basis points to +309bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +394bps over bmk*
5-yr T-bond PL5YT=RR +7 basis points to +334bps over bmk*
10-yr T-bond PL10YT=RR +5 basis points to +292bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -16 basis points to +773bps over bmk*
5-yr T-bond HU5YT=RR -51 basis points to +695bps over bmk*
10-yr T-bond HU10YT=RR -41 basis points to +591bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1555 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Balazs Koranyi, Marton Dunai and Sandor Peto;
Editing by Ron Askew)
