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CEE MARKETS 4-Currencies firm after Polish GDP, stay fragile
March 1, 2012 / 9:06 AM / 6 years ago

CEE MARKETS 4-Currencies firm after Polish GDP, stay fragile

 (Recasts with new prices and comments)	
 * FX correction is a risk after recent rally
 * Currencies gained Weds after ECB liquidity injection
 * Poland records strong Q4 GDP, worse than expected PMI
 By Radu Marinas and Sandor Peto	
 BUCHAREST/BUDAPEST, March 1 (Reuters) - Emerging
European currencies firmed on Thursday, lifted by Poland's
robust growth figures and Wednesday's cash injection by the
European Central Bank to markets.	
 Assets in the European Union's emerging economies shrugged
off mixed manufacturing figures and a retreat of the euro 
against the dollar, which often makes investors avoid risky
 The region's safe haven unit, the Czech crown, was
bid at 24.752 against the euro at 1552 GMT, firmer by 0.6
percent, after crossing its 200-day moving average of 24.86.	
 "Closing below (firmer than the moving average) would put us
on path to 24.400-500," one Prague-based dealer said.	
 Poland, Central Europe's biggest economy, reported 4.3
percent annual growth for the fourth quarter of 2011.	
 The country's zloty was bid at 4.102 to the euro,
stronger by 0.4 percent. 	
 Purchasing Manager Index data, however, showed that economic
output in the region could remain under pressure from public
sector belt-tightening, high unemployment, weak lending and a
slowdown in western export markets..	
 The Czech and Hungarian figures indicated a mild pick-up in
economic activity in February, suggesting that a fall in
manufacturing may have bottomed out, while the Polish figure
just broke even after a surprise rise in January.	
 Capital Economics said in a note that Poland would continue
to outperform in the region and the figures eased fears that
Czech and Hungarian industrial output could fall sharply.	
 But the outlook for export markets in Europe remains bleak.	
 "As such, output growth in industry and the economy more
generally will remain sluggish at best in 2012 across the
region," it added.	
 The crown, the zloty and the forint have firmed
3-9 percent this year. The region's most stable unit, the
Romanian leu posted a modest loss, being bid at 4.348,
flat from Wednesday.	
 The weak economic outlook makes the rebound of the region's
currencies fragile, dealers aand analysts said.	
 In a survey published on Thursday, Hungary's central bank
said lending conditions for companies had tightened.
 Societe General said in a note that Hungary, which is
seeking international financial support, was particularly
vulnerable, and recommended investors that they should buy the
euro against the forint at 287.80, with an initial target of
 The forint was bid at 287.45, firmer by 0.2 percent from
 Hungarian government bonds also firmed, with yields dropping
by 8-15 basis points. The country's 10-year bonds traded at 8.3
percent and 3-year yields were at 8.08 percent.	
 Traders said the bonds drew support from the ECB's liquidity
injections to European markets, and from hopes that the
government will secure and international credit line in the next
 "I don't rule out that yields dip to below 8 percent, but I
would not buy there," one fixed income trader said. "People
don't dare to sell as the credit talks may succeed, but the buy
side is not strong either due to fears of a failure."	
 --------------------------MARKET SNAPSHOT--------------------
 Currency                    Latest   Previous Local    Local
                                   close   currency currency
                                            change   change
                                            today    in 2012 
 Czech crown                 24.752    24.889  +0.55%    +3.2%
 Polish zloty                 4.102     4.117  +0.37%    +8.84%
 Hungarian forint           287.45    288.15   +0.24%    +9.45%
 Croatian kuna                7.566     7.567  +0.01%    -0.66%
 Romanian leu                 4.348     4.349  +0.02%    -0.62%
 Serbian dinar              110.63    110.61   -0.02%    -3.33%
 Yield Spreads
 Czech treasury bonds           
 2-yr T-bond   CZ2YT=RR    -2 basis points to  112bps over bmk*
 7-yr T-bond   CZ7YT=RR   +3 basis points to  +144bps over bmk*
 10-yr T-bond   CZ9YT=RR   +4 basis points to  +169bps over bmk*
 Hungarian treasury bonds           
 3-yr T-bond   HU3YT=RR    -11 basis points to  +773bps over bmk*
 5-yr T-bond   HU5YT=RR    -7 basis points to  +742bps over bmk*
 10-yr T-bond   HU10YT=RR  -14 basis points to  +644bps over bmk*
 *Benchmark is German bond equivalent.	
All data taken from Reuters at 1652 CET.	
Currency percent change calculated from the daily domesticclose
at 1700 GMT.For related news and prices, click on the codes in
brackets: All 
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 (Reporting by Reuters bureaus; writing by Radu Marinas/Sandor
Peto; Editing by Susan Fenton)	

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