CEE MARKETS 2-FX retreats, trade surplus supports forint
* Hungary posts 719.8 mln euro May trade surplus * U.S. non-farm payrolls data eyed for direction * Romania, Czech industrial output rise in May (Adds bonds, updates prices) BUDAPEST, July 8 (Reuters) - Emerging European currencies eased slightly on Friday, paring Thursday's gains, with the forint holding near 14-month highs versus the euro after Hungary reported a huge trade surplus for May. The forint on Thursday hit its strongest level in more than 14 months at 261.90 to the euro, helped by foreign demand. The European Central Bank's comments supporting Portugal lifted the euro, which in turn helped central European currencies as the euro is the region's reference currency. At 0948 GMT, the forint -- central Europe's top performer with a 5.7 percent gain so far this year -- traded at 262.9 versus the euro, down 0.4 percent. The Polish zloty eased 0.3 percent, the Romanian leu dropped 0.1 percent, while the Czech crown was flat. Data showed on Friday that Hungary posted a trade surplus of 719.8 million euros in May based on preliminary data, far exceeding analysts' median forecast for a 464.5 million euro surplus. "If we manage to maintain such a favourable pace this year (i.e. domestic demand remains moderate, in line with our expectations), the trade surplus could be above 7 billion euros this year," said Gyorgy Barta, analyst at CIB Bank. "The result is forint-positive and growth-positive." Dealers said U.S. data later in the day would set the mood for the afternoon session. "U.S. non-farm payrolls data is the key event today and decisive for the sentiment," a Raiffeisen Bank Polska dealer said. "Before the reading I expect the zloty to remain below 3.95 per euro, better-than-expected data may prompt the zloty to test the level of 3.92." A positive U.S. non-farm payrolls report on Friday could further boost global risk appetite and support central European assets, traders said. "If the euro firms after U.S. non-farm payrolls later today, then it would also strengthen the region," one Bucharest-based trader said. A Reuters poll forecasts U.S. non-farm payrolls rose by 90,000 in June. The data is due at 1230 GMT. Romania's adjusted industrial output rose 1.6 percent on the month in May and 8.0 percent year-on-year, data showed on Friday. Separate data showed a strong reading on Czech industrial output, which rose 15.2 percent year-on-year in May, nearly double analysts' forecasts of 8.5 percent and following 4.7 percent growth the previous month. BONDS RESILIENT Dealers said central European government debt markets have been resilient to the debt crisis in the euro zone periphery. "The bond market has proven its strength, it was immune to the recent developments concerning Portugal. On top of that the supply is limited, so it is unlikely that prices will fall", a Warsaw-based dealer said. The supply of Polish bonds has been limited after the Polish finance ministry at the end of June decided to reduce the number of tenders and said it would not sell treasury bills in the July-September period. Hungarian government bond yields stabilised in quiet trade after Thursday's falls, tracking gains in the forint, which took some market players by surprise, a fixed income trader said. "Yesterday's gains in the forint sparked panic reactions among some people, many were scared on the interest rate front as well, which led to some short-covering when the forint firmed past 262 per euro," the trader said. The trader said the market was divided over whether the central bank, which has kept interest rates on hold at 6 percent at its past five policy meetings, would react to the forint's strength with an interest rate cut. "The forint has been incredibly resilient over the past half year despite what is going on in the world," the fixed income trader said. Stock markets across the region were mixed, with Budapest down 0.2 percent, Prague easing 0.5 percent , while Bucharest was flat. --------------------------MARKET SNAPSHOT-------------------- Currency Latest Previous Local Local close currency currency change change today in 2011 Czech crown 24.203 24.222 +0.08% +3.29% Polish zloty 3.943 3.932 -0.28% +0.38% Hungarian forint 262.8 262.08 -0.27% +5.78% Croatian kuna 7.389 7.37 -0.26% -0.12% Romanian leu 4.196 4.195 -0.02% +0.88% Serbian dinar 101.2 100.53 -0.66% +4.67% Yield Spreads Czech treasury bonds <0#CZBMK=> 2-yr T-bond CZ2YT=RR -6 basis points to -4bps over bmk* 7-yr T-bond CZ7YT=RR 0 basis points to +71bps over bmk* 10-yr T-bond CZ9YT=RR -3 basis points to +87bps over bmk* Polish treasury bonds <0#PLBMK=> 2-yr T-bond PL2YT=RR +3 basis points to +326bps over bmk* 5-yr T-bond PL5YT=RR +5 basis points to +318bps over bmk* 10-yr T-bond PL10YT=RR +3 basis points to +283bps over bmk* Hungarian treasury bonds <0#HUBMK=> 3-yr T-bond HU3YT=RR +1 basis points to +496bps over bmk* 5-yr T-bond HU5YT=RR +2 basis points to +487bps over bmk* 10-yr T-bond HU10YT=RR -1 basis points to +427bps over bmk* *Benchmark is German bond equivalent. All data taken from Reuters at 1142 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 Middle East spot FX Asia spot FX Latin America spot FX Other news and reports World central bank news Economic Data Guide Official rates Emerging Diary Top events Diaries Diaries Index (Reporting by Reuters bureaux; Writing by Krisztina Than, Gergely Szakacs; Editing by Hugh Lawson)
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