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CEE currencies weakened on rising tensions in Greece
Fri, Feb 26 2010, 09:23 GMT
felt some negative spill over effect form rising Greek sovereign risk premium and it eased slightly yesterday. Nevertheless, the EUR/CZK pair failed to break above the psychological resistance standing at the 26.0 level. Nevertheless, it seems that the pair has been finally successful to bounce above this level. The domestic calendar remains empty till the beginning of the next week, so unless the market faces some unexpected comments form domestic central bankers, the koruna will rather watch other foreign markets, where news about Greece and the US eco fundamentals might play the central stage.
flattened in a bullish fashion yesterday, but trading was very light again. Interestingly, the asset-swap spreads between bond yields and swap rates have continued tightened despite rising risk premium on government bond in the Euro-zone periphery. The same is true for the Czech CDS. We think that such a positive developments might (at least temporary) reverse if Greece is downgraded for instance.
weakened a bit on Thursday afternoon on the back of a bitter tone on equity markets. The pair slid to 271.50 from 270.00 and settled in between at 270.80 this morning. It seems that market concerns about the sustainability of the recovery process are back and this could hurt emerging market currencies after their 11-months old rally since last March.
Statistical data showed further increase on the unemployment rate to 10.8% from 10.5% in January and double-digit fell of investments in the fourth quarter at -11% Y/Y. These are slightly worse than expectations, so risk of a slower recovery or a double-dip is also an issue here.
had a good day despite the currency’s volatility. Yields dropped 10bps at the longer-end and the 10-year benchmark fixing decreased to the key level of 7.50%, which was a strong resistance level in the previous months. Auction results showed decent interest for 3-, 5- and 10-year bonds with bid-cover ratios close to 3. Foreign investors could have been particularly active after the rally on core markets, but we think this rally could be short-lived and fundamental concerns could quickly reverse this after the April election.
went through a pretty uneventful session. The zloty was under pressure during the day as threats of further Greek downgrade intensified and worse US initial claims weighed on the region. Nevertheless the pair failed to get above 4.00 EUR/PLN and trimmed most of the losses later during offshore trading. The domestic scene is empty at the end of the week. We expect sentiment on global markets to remain shaky and the zloty seems to be pretty resilient so far. Hence we expect rather calm trading in wait and see mode today.