CEE MARKETS 2-Zloty at 3-1/2 week low on Polish euro plans, flu

                                
 * Zloty falls more on euro hope reversal
                                
 * Investors book profit on stocks due to flu uncertainty
                                
 
  (Adds details, fixed income)
                                
 By Jason Hovet
                                
 PRAGUE, April 27 (Reuters) - The zloty fell to a 3-1/2 week
low on Monday on Poland's fading euro hopes, while uncertainty
over North America's swine flu outbreak rattled investors who
cut risk.
                                
 Governments around the world moved to contain the spread of
a flu virus that has killed more than a 100 people in Mexico and
has spread to the United States and Canada, and possibly to
Europe, Israel and New Zealand. [ID:nN27484099]
                                
 The worry prompted investors in central Europe to book
profit on gains of 8-13 percent in the Czech, Polish, and
Hungarian stock markets over the past month. [ID:nN27484099]
                                
 Poland's zloty led currency losses, falling 1.2 percent to
4.534 per euro as investors unwound trades where they had bet
long on the zloty against its regional peers. The unit has shed
7 percent since hitting a three-month high on April 15.
                                
 Data showed last week that Poland's state budget deficit
exceeded the European Union's 3 percent ceiling and would likely
do so again this year, complicating government plans to swap for
euros in 2012.
                                
 "Long Polish positions are still unwinding... The
Polish/Czech cross trade is the one most being unwound," a
central European currency dealer in Stockholm said.
                                
 "And as everyone is unsure what is going on (with the flu),
people are taking profit now."
                                
 Central European stocks followed global peers lower on
Monday, with Prague <.PX> and Warsaw <.WIG20> paring early
losses some to trade 0.5-1 percent down.
                                
 The Czech crown <EURCZK=> shed 0.2 percent to 26.675 per
euro by 0851 GMT and the Hungarian forint <EURHUF> edged up 0.2
percent to bid at 294.85 per euro. Romania's leu <EURRON=> also
inched up to 4.224.
                                
 Bonds in Hungary and the Czech Republic eased.
                                
 
                                
 A NEW BLOW
                                
 Analysts expect nearly all of the region's economies to
slide into recession this year due to falling demand for its
goods from western markets.
                                
 Global finance leaders meeting in Washington over the
weekend said a "break in the clouds" of the global economic
turmoil was appearing. [ID:nN26475263]
                                
 But the threat of a flu pandemic only added to jitters of a
fragile economic recovery. The World Bank estimated last year
that a flu pandemic could cost the global economy $3 trillion.
[ID:nHKG369044].
                                
 "The turn of events in Mexico again highlights the
particular vulnerability this year of the global economy to any
"natural" disasters," Cheuvreux emerging markets economist Simon
Quijano-Evans wrote in a morning note.
                                
 Currencies, led by the zloty, have fallen by up to a quarter
since record highs last summer as worries over banking stability
and weak manufacturing reversed investment flows, putting a
strain on policymakers.
                                
 Strategists expect pressure to remain despite 5-10 percent
gains since February lows as economic woes hit jobs and banks.
                                
 The Polish and Hungarian central banks said on Monday they
would continue foreign exchange swap agreements with the
European Central Bank and the Swiss National Bank until the end
of July.[ID:nLR106476][ID:nWAR008224]
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.675   26.615  -0.22%    +0.29%
Polish zloty     <EURPLN=>    4.534    4.481  -1.17%    -9.24%
Hungarian forint <EURHUF=>  294.85   295.42   +0.19%   -10.62%
Croatian kuna    <EURHRK=>    7.435    7.42   -0.2%     -0.94%
Romanian leu     <EURRON=>    4.224    4.23   +0.14%    -4.96%
Serbian dinar    <EURRSD=>   94.45    94.25   -0.21%    -5.26%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +4 basis points to  178bps over bmk*
4-yr T-bond   CZ4YT=RR   +19 basis points to  +208bps over bmk*
8-yr T-bond   CZ8YT=RR   +16 basis points to  +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +3 basis points to  +899bps over bmk*
5-yr T-bond   HU5YT=RR   +9 basis points to  +846bps over bmk*
10-yr T-bond   HU10YT=RR  0 basis points to  +732bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1054 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus, writing by Jason Hovet, editing
by Victoria Main)