CEE MARKETS 2-Zloty leads FX higher on rate rise expectations

                                
 * Inflation data increases chance of Polish rate rise
                                
 * Polish bonds rise 7-12 basis points
                                
 * Currencies also buoyed by euro, return of risk appetite
                                
 * Stock markets mixed
                                
 
                                
(Adds bonds, updates currencies and stocks)
                                
 By Sam Cage
                                
 BUCHAREST, Feb 16 (Reuters) - Poland's zloty led emerging
European currencies higher in early trade on Wednesday, buoyed
by higher than expected inflation figures that fuelled
expectations of an interest rate hike.
The zloty <EURPLN=> gained 0.4 percent by 0946 GMT and
Polish bonds rose after January inflation, reported on Tuesday,
jumped to a 21-month high of 3.8 percent, overshooting the
central bank's target range. [ID:nLDE71E1PD]
                                
 "After the CPI figure, our forecast for a rate hike in March
looks very likely," ING's Rafal Benecki said in a note.
                                
 Polish interest rates are currently at 3.75 percent and
Benecki said the inflation data should mean increases in the
earlier part of 2011.
                                
 Other central European currencies rose -- the Czech crown
<EURCZK=> and Hungary's forint <EURHUF=> were both 0.2 percent
higher -- also benefiting from a firming of the euro, the
region's main reference currency.
                                
 Romania's leu <EURRON=> was close to resistance at 4.25 per
euro and dealers said it could push through that as high as
4.22, benefiting from better than expected economic growth
reported on Tuesday. [ID:nLDE71E0FY]
                                
 "Higher than expected Poland CPI was the main driver and now
we see stronger EUR vs USD, which pushed equities higher, and
apparently risk is back on," said one dealer in Bucharest.
                                
 Stocks were mixed across the region, with Budapest <.BUX>
and Bucharest <.BETI> nudging higher and Warsaw <.WIG> and
Prague <.PX> falling slightly.
                                
 
                                
 POLISH BONDS STRENGTHEN
                                
 Polish bonds have risen 7-12 basis points since the
inflation data and markets are now eyeing comments from more
dovish central bankers for hints they may also call for rate
rises, said Piotr Zoltowski, debt dealer at Bank BPH in Warsaw.
                                
 "The opening was a little higher ... but the move was not as
large as yesterday after the inflation data," Zoltowski said.
                                
 "The middle of the curve is moving up, while the short and
long end less so."
                                
 Credit agency Moody's warned of risks tied to Hungary's
"unambiguously credit-negative" changes to its pension system on
Wednesday and said Poland's similar but much less severe reforms
would not likely trigger a downgrade. [ID:nLDE71F0XQ]
                                
 The moves have raised concern among investors who are
keeping a close eye on both countries, which have largely
avoided the austerity programmes embraced by other neighbours in
favour of one-off measures aimed at boosting revenue.
                                
 The forint and Hungarian bonds were little changed after the
Moody's comments.
                                
 Poland sold some 2.45 billion zlotys worth of floating rate
bonds and inflation-linked papers at a Wednesday auction. The
yield on the longer bond, maturing in 2023, was marginally down
from the previous equivalent auction in December.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011 
Czech crown      <EURCZK=>   24.304   24.347  +0.18%   +2.86%
Polish zloty     <EURPLN=>    3.915    3.928  +0.33%    +1.1%
Hungarian forint <EURHUF=>    270.7   271.17  +0.17%   +2.69%
Croatian kuna    <EURHRK=>    7.406    7.405  -0.01%   -0.35%
Romanian leu     <EURRON=>    4.256    4.254  -0.05%   -0.54%
Serbian dinar    <EURRSD=>   103.32   103.31  -0.01%   +2.52%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond    CZ2YT=RR   +11 basis points to  50bps over bmk*
7-yr T-bond    CZ7YT=RR   +4 basis points to  +87bps over bmk*
10-yr T-bond   CZ9YT=RR   +7 basis points to  +91bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +7 basis points to  +374bps over bmk*
5-yr T-bond   PL5YT=RR   +9 basis points to  +346bps over bmk*
10-yr T-bond PL10YT=RR   +7 basis points to  +309bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +2 basis points to  +518bps over bmk*
5-yr T-bond   HU5YT=RR   +5 basis points to  +482bps over bmk*
10-yr T-bond  HU10YT=RR  +5 basis points to  +422bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1146 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
(Additional reporting by Reuters bureaus; Editing by John
Stonestreet)