*Currencies seen retreating in next 3 months
*Zloty, crown seen firmer in six months
*Zloty seen gaining 9 pct in 12 mths, crown and leu 3 pct
*Forint seen weaker in 6 months, flat in 12 months
By Sandor Peto
BUDAPEST, July 2 (Reuters) - Central European currencies are
likely to retreat in the short term as their rally in the past
few weeks has been overdone, but they will rise over the next 12
months led by the zloty, a Reuters poll of analysts showed.
The poll, conducted on June 29-July 2, showed the Hungarian
forint is seen bucking the trend and posting no further gains.
According to the poll with 42 participants <CEEFXPOLL01>,
the region's four main units are expected in the next months to
give up part of the sharp gains posted in the past weeks.
The forint <EURHUF=>, which has firmed over 18 percent from
record lows against the euro in March, is seen retreating four
percent from Wednesday's closing levels by end-September.
The Czech crown <EURCZK=>, after a 15 percent rise since
February, is expected to shed 3 percent in the next 3 months,
while the Polish zloty <EURPLN=> which has slightly lagged the
other two units this year is seen retreating only one percent.
The median forecast puts the three-month loss of Romania's
leu <EURPLN=>, the most stable unit this year, to 1.5 percent.
"Most currencies in the Central European region firmed more
than expected in the past weeks, particularly the forint and
Czech crown," said Radomir Jac, analyst at Generali PPF Asset
Management in Prague.
"We think that particularly the forint may correct its
recent gains in weeks to come: last but not least because the
NBH (central bank) is likely to restart its monetary policy
easing cycle in the summer months," he added.
SHORT-TERM RISKS REMAIN
The region's units hit record highs a year ago but posted
sharp losses in the autumn and early this year as the global
crisis sent their economies into deep recession, or in the case
of Poland, stagnation.
But risk aversion has turned into cautious optimism since
March. The European Union's emerging markets saw capital inflows
in the past weeks, with increased movements in intra-region
currency crosses as investors start to weigh risks and yields.
The units in Central Europe are seen remaining volatile,
sensitive to the global mood, to expected interest rate cuts by
central banks and a likely deterioration of state budgets.
"Thanks to (financing from) the World Bank, IMF and the EU,
the countries of Eastern Europe received massive financial
support that reinforced investors' confidence in our region but
the financial situation is still fragile and trading is still
based on sentiment," said Balint Hada of Quaestor in Budapest.
Maja Goettig of Bank BPH in Warsaw said: "Another risk
factor is renewed concern over devaluation in Latvia if it turns
out IMF and EU support is not enough, which would negatively
weigh on CEE currencies including the zloty."
RECOVERY WILL BE A BOOST
The currencies of export-reliant Central Europe have room to
firm in the next 12 months which could bring more evidence that
the world is recovering from the crisis, while current accounts
in the region have already improved robustly, analysts said.
The poll showed the zloty gaining two percent in six months
and nine percent in 12 months, the crown and the leu to firm
three percent in the next one year and the forint to return to
current levels, after three percent loss by the end of 2009.
The zloty will benefit from the government's statement about
the size of a planned rise in the budget deficit [],
removing a key uncertainty factor, analysts said.
"As negative factors disappeared, the Polish currency will
be fully benefiting from better global sentiment and rising risk
appetite," said Joanna Pluta of TMS Broker in Warsaw.
To see the June European asset allocation poll of Reuters,
please click on [][]
(Reporting by Sandor Peto; Editing by Toby Chopra)
