Central European Currencies modest gains

BUDAPEST: Central European currencies trimmed their early gains on Monday as weaker than expected PMI indexes in the euro zone dented investors' optimism following Sunday's summit and signalled a risk of recession in the region's main trading partner.

The region's stocks were up 0.1 to 2 percent, with Warsaw's main equity index leading gains but still 18 percent down on the year.

By 1358 GMT the zloty firmed 0.3 percent against the euro to 4.374. Earlier in the day it had dropped to Friday's closing levels of 4.391 to the euro after PMI data showing the euro zone's private sector tipped further into decline in October.

"If there is a credible solution to it (the euro zone crisis), all CEE currencies can strengthen significantly," KBC said in a note.

At a summit on Sunday, European Union leaders neared agreement on bank recapitalisation and the use of European Financial Stability Facility (EFSF) to stave off bond market contagion.

This, together with upbeat PMI data from China, improved investors' mood ahead of the Wednesday second EU summit, where decisions are expected to be taken over the size of losses that private holders of Greek government bonds will have to accept.

Copyright Reuters, 2010