The Czech koruna got under pressure as global investors became more risk averse on Thursday. That happened despite solid US figures including further improvement in the important Philly Fed index. Some nervousness could have come from the announcement of capital controls on some emerging markets. Brazil unveiled a new tax on Wednesday to curb capital inflows. It could have made emerging markets investors nervous.

Furthermore on the Czech markets the dovish comment by central bank vice governor Singer could have played certain role. Today we bet on calmer session and some stabilization. The koruna could trim some of its recent losses. Trade volumes on the Czech bond market stayed low after Tuesday’s Czech national holiday. Yesterday, Czech yields declined over the whole length of the curve and the curve flattened. CNB vice governor Mr.Singer repeated that the strong domestic currency is the main threats to the Czech economic development. This might have played a limited role, too. Even today the domestic bond market could hardly leave its quiet mood. Hence, we expect a minimum of business activities with the possibility of a correction of yesterday's price gains. Hungary The Hungarian forint continued this week’s weakening trend on Thursday and the pair dropped about 1% to the key 268.00 level. It slid to below this level late in the evening after US equity markets opened sharply lower, but the stabilization thereafter helped the forint to regain some strength and recover to around 267.50. The currency’s 265.00 level also raised the possibility of a deeper than expected rate cut on Monday, which could have played a role in limiting the currency’s strength. The short-term future could depend largely on the global sentiment, while usually a 50bps rate cut decision is followed by some weakening as the market tries to test the weak side of the range.

The Hungarian fixed income market lost some 5bps with the weaker currency, but selloff was limited as demand for the 3-year bond was relatively high on the auction. The bid/cover ratio was above 3.0 here, while the interest for longer-dated securities, like 5-year and 10-year bonds remained shallow. AKK even had to lower the supply in order to limit the negative effect on yields.

Poland The Polish zloty stayed under pressure as the sentiment on the global markets deteriorated on Thursday. The pair got as high as 4.17 EUR/PLN and more or less ignored favorable industrial figures. Solid performance of the Polish industry (1.9% m/m;-1.2% y/y) was driven mainly by construction and electricity. Manufacturing still lags behind and recovers pretty slowly and mining is even further behind. Overall the figures confirm ongoing recovery process in the Polish economy which should form a space for monetary tightening in 2010. Today the session is empty. Core inflation figures usually do not attract much attention. The zloty may calm down a bit and trim some of the recent losses.

KBC