* Crown extends losses on rate cut expectations
* Hungary cbank minutes confirm rate cut prospects
* Politics weighs on leu, zloty
(Recasts with fresh prices, comments)
By Jason Hovet and Sandor Peto
PRAGUE/BUDAPEST, Oct 7 (Reuters) - The Czech crown slipped
to a one-month low and other units in the region also retreated
as the dollar's rebound added to pressure from monetary easing
expectations and political uncertainty in the region.
Latvia's latest government bond auction fell flat, and
concerns linger that the financial problems of Latvia can impact
the markets of bigger states in Central Europe.[]
While shares in the broader emerging market universe were
higher <MSCIEF>, Warsaw's equity index <> shed over 1.5
percent, Budapest <> lost over one percent and Prague's
<> 0.7 percent by 1400 GMT.
Among currencies, Poland's zloty <EURPLN=> led losses,
slipping one percent against the euro to 4.229. Hungary's forint
<EURHUF=> eased 0.7 percent and Romania's leu 0.1 percent.
The three units were near the trend line of the past few
weeks, while the Czech crown, which lost 0.6 percent on
Wednesday to trade at 25.717, was around its weakest levels
since early September.
The Czech government, however, lifted its 15-year bond offer
at an auction. Demand jumped due to limited supply, and the
dovish rhetoric of the central bank also lent support.
Czech central bank chief Zdenek Tuma told Reuters earlier
this week that the bank's board discussed market intervention
against the crown's firming at September's policy meeting as a
possible way to ease policy. []
Tuma along with Vice-Governor Miroslav Singer were in the
minority at the last meeting in voting for a rate cut, which
markets have taken as a signal that rates could go lower at
November's meeting. []
RATE CUTS, POLITICAL JITTERS
Singer said on Tuesday the central bank will likely return
to discussing tools to ease policy. []
"We've seen strong corporate demand for euros... Oil has
been dripped on the fire by the recent central bank comments,"
said one Prague dealer. "I think 25.700/750 level could be the
top of the range of this move, but overall we could be heading
back again to 26 (to the euro)."
The minutes of the Sept. meeting of Hungary's central bank
also signalled further interest rate cuts in the coming months,
but its main rate of 7.5 percent is well above the Czech bank's
1.25 percent, which is at an all-time low. []
"The forint will stay in its usual 265-275 range," one
Budapest-based dealer said. "I will not be surprised if it eases
past 270 (from 268.7), it has passed that level several times in
the past weeks.
Analysts in a Reuters poll said early this week that the
region's currencies could post mild gains in the next months and
the zloty could surge by 8 percent in 12 months as investors
differentiate between countries in the region. []
Romania's leu is also seen gaining if it leaves behind
political uncertainty after a split in its ruling coalition. In
Poland a scandal over a gambling bill triggered resignations in
the government. []
"This does not have a big influence on the zloty as it's not
a danger to the stability of the whole government," said Joanna
Pluta, analyst at TMS Brokers in Warsaw.
Hungarian bonds reversed early gains as investors used the
forint's weakening as a peg to lift yields ahead of government
bond auctions on Thursday. <HUISSUE> Polish bond were mixed.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.717 25.572 -0.56% +4.03%
Polish zloty <EURPLN=> 4.229 4.186 -1.02% -2.7%
Hungarian forint <EURHUF=> 268.7 266.82 -0.7% -1.92%
Croatian kuna <EURHRK=> 7.255 7.255 0% +1.52%
Romanian leu <EURRON=> 4.266 4.258 -0.19% -5.9%
Serbian dinar <EURRSD=> 92.902 93.02 +0.13% -3.68%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -1 basis points to 160bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +174bps over bmk*
10-yr T-bond CZ10YT=RR -11 basis points to +155bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +389bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +343bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +307bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +7 basis points to +554bps over bmk*
5-yr T-bond HU5YT=RR +5 basis points to +525bps over bmk*
10-yr T-bond HU10YT=RR +5 basis points to +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1600 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus; writing by Jason Hovet/Sandor
Peto; Editing by Ruth Pitchford and Toby Chopra)
