Emerging Europe's currencies mixed

Emerging Europe's currencies were mixed on Monday in trade cut to a minimum by the closure of key global markets, treading water ahead of major data later in the week after sentiment indexes that were broadly in line with expectations. Monday's PMI releases for the region showed a Czech reading slightly above forecasts and Poland's index below estimates, having little overall impact on the foreign exchange market.
With the eurozone debt crisis still dominating sentiment into the new year, Hungary's forint, the region's worst performer in 2011, hovered around its previous closing levels against the common currency at 1139 GMT while the Czech crown eased 0.4 percent.
"It's just a little correction, we are merely returning to the levels we have dropped from," said a Prague-based dealer. "The market is waiting for the major data from the US at the end of this week."
In Hungary, parliament passed a central bank law on Friday, defying EU and IMF warnings that the legislation infringed the bank's independence and threatening talks on a funding deal economists say is essential for shoring up the country's financial markets. Given the uncertainty over the talks with international lenders, the forint is expected to remain under pressure, analysts say. "The levels between 317.50 and 318 are critical for the forint. If it weakens past this then it's uncharted territory again," said one Budapest-based dealers.
The zloty was also little changed after a volatile session on Friday when state-owned bank BGK stepped into the spot market ahead of a key fixing that set the year-end level as a proportion of GDP for Poland's public debt. Market players say that 4.36-4.38 to the euro is a key support level for the zloty and 4.47 the key resistance. If the currency tops this level it could quickly weaken to 4.52.
Romania's leu edged 0.1 percent lower to the euro. On a bonds market, Polish papers were nearly flat, with only longer-end of the curve slighty stronger. Finance Minister Jacek Rostowski told a weekly Newsweek that Poland's central bank may buy the state's bonds in the secondary market if yields rise sharply on the back of a panic or a crisis.