CEE MARKETS 2-Strong dollar, political jitters hit FX

                                
  (Adds details, fixed income)
                                
 PRAGUE, Sept 2 (Reuters) - Hungary's forint led emerging
European currencies lower on Tuesday, knocked back by domestic
political turbulence as the stronger dollar weighed on markets
across former communist central Europe.
 The forint <EURHUF=> slid 0.4 percent to 239.0 by 0824 GMT,
still feeling the impact of Hungary's liberal opposition's
promise to reject the Socialist minority government's tax cut
programme, which will be a key part of next year's budget.
                                
 The government will need votes from the Free Democrats to
pass its 2009 budget. On Tuesday, the party's leader Gabor Fodor
attacked the socialists by suggesting they could be replaced by
a "government of experts" [ID:nL2633274].
                                
 Others say a more likely outcome is the replacement of Prime
Minister Gyurcsany with someone acceptable to the Free Democats,
which is unlikely to press for early elections as it now polls
well below the 5 percent needed to enter parliament.
                                
 Regionally, the dollar's gains against the euro hurt
currencies, as investors shifted positions to the greenback.
                                
 "The whole region is weakening, including the zloty, and the
political wrangling can also be behind it (the forint
weakening)," one Budapest dealer said.
                                
 The Polish zloty <EURPLN=> fell to 3.358 a euro from 3.346
at Monday's domestic close, the Czech crown <EURCZK=> eased to
24.868 a euro, or 0.1 percent down, and Romania's leu <EURRON=>
dipped to 3.532, from 3.518 per euro.
                                
 The weak currencies hit bond prices, with yields in the
region rising. 
                                
 "I think the market will focus both on the zloty and on the
region, especially the situation in Hungary," said Piotr Koluda,
a dealer at PKO BP in Warsaw.
                                
 In Croatia, the kuna <EURHRK=> was up 0.2 percent at 7.138
to the euro, while the Serb dinar <EURRSD=> was down 0.3 percent
to 76.45 per euro.
                                
 Regional currencies have lost ground since hitting record
highs in July after a global economic slowdown spread to the
euro zone, dimming the growth outlook for the region as most
exports head west.
                                
 Data on Monday showed Czech and Polish manufacturing
suffered the sharpest fall in more than five years in August,
although Polish growth numbers on Friday also showed the economy
expanded faster than analysts' forecasts in the second quarter.
                                
 Friction between Russia and Georgia has also raised some
investor wariness in the region.
                                
 
========================Market Snapshot========================
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2008 
Czech crown      <EURCZK=>   24.868   24.840  -0.11%   +6.15%
Polish zloty     <EURPLN=>    3.358    3.346  -0.36%   +6.74%
Hungarian forint <EURHUF=>  239.000  238.050  -0.40%   +5.48%
Croatian kuna    <EURHRK=>    7.138    7.153  +0.21%   +2.57%
Romanian leu     <EURRON=>    3.532    3.518  -0.40%   +1.35%
Serbian dinar    <EURRSD=>   76.450   76.200  -0.33%   +2.93%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR    -9 basis points to   -4bps over bmk*
5-yr T-bond   CZ5YT=RR    -2 basis points to   +13bps over bmk*
10-yr T-bond  CZ10YT=RR   -1 basis points to   +36bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -10 basis points to  +217bps over bmk*
5-yr T-bond   PL5YT=RR    -10 basis points to  +203bps over bmk*
10-yr T-bond  PL10YT=RR   -8 basis points to   +184bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -6 basis points to   +492bps over bmk*
5-yr T-bond   HU5YT=RR   +13 basis points to   +467bps over bmk*
10-yr T-bond  HU10YT=RR  +4 basis points to    +386bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1024 CET.
Currency percent change calculated from the daily domestic 
close at 1500 GMT.

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 (Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Patrick Graham)