* FX fall on weaker footing, zloty at 2-week low
* CPI data keeps rate cuts in view
* Hungary bonds stronger on short end
(Updates prices to show drop)
By Jason Hovet
PRAGUE, Aug 11 (Reuters) - The Polish zloty fell to an
almost two-week low on Tuesday as investors booked recent gains,
while slowing inflation in central European kept the region's
currencies on weaker ground.
The zloty <EURPLN=> fell 0.9 percent to 4.16 to the euro by
1138 GMT after touching its lowest since the end of July in
earlier trade, and the crown bid down 0.3 percent from Monday's
domestic close at 25.753.
"All of emerging market currencies are weakening," said one
Warsaw-based dealer. "It looks like investors are concerned over
potential further dollar appreciation."
The zloty has been the biggest gainer among central European
currencies, with a 7 percent rise since the start of June,
outpacing around 3 percent gains for the crown and Hungarian
forint <EURHUF=>.
The forint was down 0.7 percent at 271.66 to the euro on
Tuesday, and the Romania leu <EURRON=> was steady.
Investors absorbed more inflation data in the region that
offered some leeway for central banks to keep rates low as the
region comes to grips with faltering economies. []
In Romania, inflation slowed more than expected in July,
while Hungarian inflation surged due to tax changes but by less
than forecast by analysts, who said the lower interest rate
outlook was unchanged. [] []
"The general picture that we are seeing is a tendency for
CPI to decelerate ... and that leaves room open for further rate
cuts in the region," said Lars Christensen, emerging markets
economist at Danske Bank.
"So in general the trend is for softer currencies but at the
moment global risk sentiment is overshadowing that."
RATE DEBATE
The region's CPI figures followed a sharp deceleration in
Czech inflation, revealed by data on Monday. Poland's data are
due on Wednesday and analysts see the figure above the central
bank's target, which could put a pause on policy easing.
Bonds in the Czech Republic and Hungary were stronger on the
short end, with investors in the latter pricing in a roughly 50
basis point cut for August's rate meeting, dealers said.
Hungary's interest rates are among the highest in Europe
even after the central bank cut to 8.5 percent two weeks ago,
its first move since January that analysts said was designed to
catch up with the rest of the region.
"It's hard to allocate money when clients get double-digit
interest rates at commercial bank deposits," Budapest fixed
income dealer said.
"Funds or insurers might buy the long end, but they don't
seem to have too much cash right now."
Rate setters across the region have mostly suggested they
are near the end of easing cycles.
But some analysts say that while there are early signs of
the region's economy finding a floor, rapidly decelerating
inflation due to continued economic weakness may force
policymakers to embark on further rate cuts.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.753 25.675 -0.3% +3.88%
Polish zloty <EURPLN=> 4.16 4.123 -0.89% -1.08%
Hungarian forint <EURHUF=> 271.66 269.87 -0.66% -2.99%
Croatian kuna <EURHRK=> 7.322 7.332 +0.14% +0.59%
Romanian leu <EURRON=> 4.206 4.207 +0.02% -4.56%
Serbian dinar <EURRSD=> 93.51 93.3 -0.22% -4.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +27 basis points to 120bps over bmk*
4-yr T-bond CZ4YT=RR +18 basis points to +146bps over bmk*
8-yr T-bond CZ8YT=RR +12 basis points to +246bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +669bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +600bps over bmk*
10-yr T-bond HU10YT=RR -1 basis points to +517bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1340 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Stephen Nisbet)
