CEE MARKETS 3-FX weaker, Romanian cbank cuts key rate by 50 bps

                                
 * FX weaken, zloty helped by long PLN/HUF trade
                                
 * Romania cuts key rate by 50 bps to 8.5 pct as expected
                                
 
                                
 (Recasts with Romanian rate cut)
                                
 By Krisztina Than
                                
 BUDAPEST, Aug 4 (Reuters) - East Europe's currencies
weakened on Tuesday on profit taking after a recent rally, while
the Romanian leu was a touch softer after the central bank cut
rates by 50 basis points as expected to ease recession.
                                
 Romania's central bank also cut the minimum reserve
requirements on foreign currency denominated liabilities
[ID:nL4422717] which analysts said showed it was eager to
support the banking sector.
                                
 Its fourth cut so far this year took its benchmark rate to
8.5 percent to match that of neighbouring Hungary which cut by
100 basis points last week.[ID:nL4379419]
                                
 Some dealers said players were now buying zlotys and selling
forints because the interest rate spread has narrowed, while the
Polish economy is in better shape than Hungary's.
                                
 "The favourite trade is zloty/forint long again ... volumes
are thin, and sentiment continues to be strong," a
Budapest-based currency dealer said.
                                
 "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 1.5 percent at 1033 GMT, and
the Warsaw stock market <.WIG20> down 1.66 percent.
                                
 Unicredit recommended long PLN/HUF trade in a note to
clients on Monday.
                                
 "Recent sentiment indicators ... suggest that countries with
more stable fundamental backdrops, 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.
                                
 
                                
 MARKET SPLIT ON CZECH RATES
                                
 Hungary's forint <EURHUF=> was down 0.6 percent, while
Poland's zloty <EURPLN=> was down 0.3 percent at 1030 GMT. The
Czech crown <EURCZK=> was down 0.6 percent and the Romanian leu
<EURRON=> lost 0.2 percent.
                                
 On Monday, the zloty was supported by a record jump in 
Poland's Purchasing Managers Index and by a finance ministry
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 Czech central bank will cut 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=>   25.823    25.66   -0.63%   +3.6%
Polish zloty     <EURPLN=>   4.113    4.101    -0.29%   +0.05%
Hungarian forint <EURHUF=>   266.27    264.6   -0.63%    -1.02%
Croatian kuna    <EURHRK=>   7.337    7.336    -0.01%   +0.38%
Romanian leu     <EURRON=>   4.207    4.199    -0.19%    -4.58%
Serbian dinar    <EURRSD=>   92.847    93.047  +0.22%    -3.63%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +2 basis points to  131bps over bmk*
4-yr T-bond   CZ4YT=RR    -27 basis points to  +141bps over bmk*
8-yr T-bond   CZ8YT=RR   +14 basis points to  +282bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -3 basis points to  +359bps over bmk*
5-yr T-bond   PL5YT=RR   +3 basis points to  +291bps over bmk*
10-yr T-bond PL10YT=RR    0 basis points to  +267bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -23 basis points to  +679bps over bmk*
5-yr T-bond   HU5YT=RR    -55 basis points to  +609bps over bmk*
10-yr T-bond   HU10YT=RR  -46 basis points to  +523bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1230 CET.
Currency percent change calculated from the daily domestic 
close at 1645 CET.
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 (Reporting by Krisztina Than, Editing by Ruth Pitchford)