CEE MARKETS 2-FX weaker, zloty supported by cross trade vs HUF

                                
 * Crown, forint ease, zloty helped by long PLN/HUF trade
                                
 * Markets eye Romanian cbank, rate cut expected
                                
 * Hungarian, Czech bonds steady in slow market
                                
 
                                
 By Krisztina Than
                                
 BUDAPEST, Aug 4 (Reuters) - East Europe's currencies eased
on Tuesday on profit taking after a recent rally, with the zloty
outperforming its peers on intra-region cross trades, dealers
said.
                                
 The Romanian central bank holds a rate setting meeting later
in the day at which it is expected to cut its key interest rate
by 50 basis points to 8.5 percent.[ID:nLT524244]
                                
 Hungary cut its key interest rates by 100 basis points to
8.5 percent last week and players are now buying zlotys and
selling forints as the interest rate spread has narrowed, while
the Polish economy is in a better shape than Hungary's.
                                
 "The favourite trade is PLNHUF long again ... volumes are
thin, and sentiment continues to be strong," a Budapest-based
currency dealer said.
                                
 The forint was trading around 266 to the euro at 0835 GMT.
                                
 "There was too much of a bullish sentiment, and now markets
take a breather ... stock markets are also going through a bit
of a negative correction," another dealer said.
                                
 The region's stock markets moved lower, with the Budapest
bourse main BUX index <.BUX> down 1.9 percent at 0830 GMT, and
the Warsaw stock market down 1.27 percent.
                                
 Unicredit recommended long PLN/HUF trade in a note to
clients on Monday.
                                
 "Recent sentiment indicators ...suggest that countries with
more stable fundamental backdrop, together with looser monetary
and fiscal conditions (including Poland) are recovering faster
than countries with bigger financial stability worries
(including Hungary)," Unicredit analyst Gyula Toth said.
                                
 After gaining about 1.5 percent against the euro on Monday,
analysts said the Polish zloty could continue appreciating as
global sentiment remains positive towards riskier assets.
                                
 "The engine of zloty gains is optimism on the global
financial markets and high risk appetite," BPH Bank analysts
wrote in a note to clients.
                                
 Hungary's forint <EURHUF=> was down 0.43 percent, while
Poland's zloty <EURPLN=> was flat against the euro at 0830 GMT.
The Czech crown <EURCZK=> was down 0.4 percent and the Romanian
leu <EURRON=> lost 0.2 percent.
                                
 On Monday, the zloty was supported by a record gain for
Poland's Purchasing Managers Index and by the finance ministry's
forecast which showed inflation could remain at 3.5 percent in
July -- well above the central bank's target.
                                
 Analysts said this could mean interest rates, at an all-time
low of 3.5 percent, could stay on hold until the incumbent
Monetary Policy Council gives way to their successors early in
2010.
                                
 Hungarian bonds were steady and Czech bonds and money
markets were also quiet on Tuesday, with markets still split on
whether the central bank will cut interest rates or hold steady
on Thursday.
                                
 A thin majority of analysts, 11 out of 20, expected the
Czech central bank to leave rates unchanged on Thursday in a
Reuters poll last week while 9 analysts forecast a cut
[ID:nLT506043].
                                
 Polish bond prices were stable after almost a week-long
rally on the back of improved market sentiment and zloty gains.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   25.762    25.66   -0.4%   +3.85%
Polish zloty     <EURPLN=>   4.101    4.101     0%     +0.34%
Hungarian forint <EURHUF=>   265.75    264.6   -0.43%  -0.83%
Croatian kuna    <EURHRK=>   7.337    7.336   -0.01%   +0.38%
Romanian leu     <EURRON=>   4.206    4.199   -0.17%    -4.56%
Serbian dinar    <EURRSD=>   92.87    93.047  +0.19%    -3.65%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +1 basis points to  130bps over bmk*
4-yr T-bond   CZ4YT=RR   +2 basis points to  +170bps over bmk*
8-yr T-bond   CZ8YT=RR   +10 basis points to  +279bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -3 basis points to  +358bps over bmk*
5-yr T-bond   PL5YT=RR    +1 basis points to  +289bps over bmk*
10-yr T-bond PL10YT=RR    -1 basis points to  +266bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -26 basis points to  +677bps over bmk*
5-yr T-bond   HU5YT=RR    -57 basis points to  +607bps over bmk*
10-yr T-bond  HU10YT=RR   -47 basis points to  +522bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1033 CET.
Currency percent change calculated from the daily domestic 
close at 1645 CET.
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 (Reporting by Krisztina Than, editing by Mike Peacock)