European currencies mixed

Emerging European currencies were mixed on Friday on the prospect of slower economic growth and lower interest rates, while the EU's decision to abandon budget talks failed to move the region, market watchers say. Sources told Reuters that EU leaders did not reach an agreement on a seven-year budget for the bloc, pointing to a cut in influential EU funding for the region for the coming years.
"Despite the negotiations fiasco, the market still believes in an agreement on Greece, and that's why currencies have not been hit so far," said Jakub Wiraszka, a dealer at BRE bank in Warsaw. By 1602 GMT, the Polish zloty had edged down 0.1 percent while the Hungarian forint eased 0.2 percent and the Romanian leu was virtually flat.
Bonds were little changed and stocks were mixed, with the bourse in Prague adding 1 percent on the back of a 3 percent rise in shares in power group CEZ, the region's largest listed company. Markets expect Poland's central bank to cut interest rates by a full percentage point within a year, and Hungary's rates are also seen declining a further 100 basis points by mid-2013 after three rate cuts in the last three months.
Still, Hungarian rates are high enough for now to shelter the forint on the short term investment opportunity, one dealer said in Budapest. "It's safe to invest (in Hungarian assets) on a one-year horizon with yields as high as they are. Risk is manageable," he said.
"Of course, low or zero growth does haunt every country in the region. We cannot surpass too far the rest of the European Union. Everybody keeps talking about that." The Czech crown added 0.4 percent to 25.325 but was expected to weaken and test 25.5 in coming days, one dealer said, due to loose monetary policy. The Czech central bank's base rate is among the lowest in the world at 0.05 percent.
The bank has said its preferred next step to loosen policy would be to weaken the crown in the foreign exchange market, but markets see less risk of this happening this year after recent falls in the crown. "There is still some verbal intervention but they have signalled 25.000 is a significant level so they are probably happy with these levels right now," Raiffeisen bank dealer Roman Fol said. Bonds remained very illiquid and yields were little changed. One dealer in Budapest said business would stay scarce at least until the National Bank of Hungary's rate decision on Tuesday.