* FX strengthen, bonds mixed; Latvia hesitates on IMF
* Hungary c.bank cuts rates 100bps to 8.5 pct
* Polish rates seen kept on hold on Wednesday
(Adds Latvia news, Hungary's surprise rate cut)
By Karolina Slowikowska and Marius Zaharia
WARSAW/BUCHAREST, July 27 (Reuters) - Most central European
currencies edged up on Monday, while the Hungarian forint
slipped as the country's central bank cut rates by 100 basis
points, more than the market had expected.
"The message of the big cut is clearly that the NBH (central
bank) is trying to use the current bullish market environment to
reduce rates as much as possible," said UniCredit's Gyula Toth.
"It also suggests that the NBH is comfortable with the
current EUR/HUF level ... We are not convinced that the rate cut
would significantly take out the appreciation pressure from the
HUF without deterioration in risk appetite.
Central European currencies were little affected by news in
Latvia that the largest party in the coalition decided against
signing an agreement with the International Monetary Fund as
global sentiment prevailed, dealers said [].
But shares in Swedbank <SWEDa.ST> fell 4.5 percent after the
announcement [].
Latvia's volatile political and economic story has been an
important driver of central European markets, as investors worry
about a spillover effect from a possible currency devaluation.
At 1234 GMT, the zloty <EUROPLN=) was 0.4 percent up since
Friday's close against the euro, the Romanian leu <EURRON=> and
the Czech crown <EURCZK=> were 0.1 percent stronger, while the
forint <EURHUF=> was 0.2 percent weaker.
The mood improvement in Poland was building for much of
July, when a raft of better-than-expected industry and retail
data were released, prompting even the most dovish central
bankers to say rates would stay unchanged for months to come.
"We have been advising investors to look into zloty upside
for a few months now, based on the fact that the Polish economy
is expected to fare better than the regional counterparts," said
Roderick Ngotho, EMEA strategist at UBS in London.
Other central European currencies have also been gaining in
recent days, in line with stocks and bonds, as appetite for risk
grew and financing conditions improved after successful taps
into international markets by Poland and Hungary.
BONDS
Bonds were stable in the region, except for Polish papers,
which were a touch down, mainly on the short-end of the curve.
This was due to concerns that growing optimism and improving
outlook, globally and domestically, may mean inflationary
pressures ahead and force the central bank to switch its focus
back to price stability from growth.
Poland's inflation remains much above the central bank's 2.5
percent target despite the sharp slowdown. On Wednesday, the
Polish central bank is due to make its monthly rate decision,
but it is widely seen likely to leave interest rates flat at 3.5
percent.
Stock markets across the region jumped as well, with
Bucharest's bourse <> up 3.5 percent and leading gains,
fuelled by rumours of a possible Banca Transilvania <BATR.BX>
takeover [].
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.513 25.54 +0.11% +4.86%
Polish zloty <EURPLN=> 4.18 4.196 +0.38% -1.56%
Hungarian forint <EURHUF=> 268 267.42 -0.22% -1.66%
Croatian kuna <EURHRK=> 7.321 7.315 -0.08% +0.6%
Romanian leu <EURRON=> 4.205 4.211 +0.14% -4.53%
Serbian dinar <EURRSD=> 93.3 92.787 -0.55% -4.09%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -4 basis points to 143bps over bmk*
4-yr T-bond CZ4YT=RR -35 basis points to +144bps over bmk*
8-yr T-bond CZ8YT=RR -6 basis points to +272bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -9 basis points to +365bps over bmk*
5-yr T-bond PL5YT=RR -4 basis points to +286bps over bmk*
10-yr T-bond PL10YT=RR -4 basis points to +264bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -29 basis points to +699bps over bmk*
5-yr T-bond HU5YT=RR -62 basis points to +607bps over bmk*
10-yr T-bond HU10YT=RR -50 basis points to +505bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1534 CET.
Currency percent change calculated from the daily domestic
close at 1600 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 Karolina
Slowikowska and Marius Zaharia; Editing by Richard Balmforth)
