CEE MARKETS 2-Zloty gets support from sales data, other FX down

                                
 * Zloty gets brief support after better-than-expected data
                                
 * Polish bonds weaker, data boost expectations for rate hike
                                
 * Other currencies fall, crown leads losses
                                
 
 (Adds Polish retail sales data, bond prices)
                                
 By Dagmara Leszkowicz
                                
 WARSAW, Oct 26 (Reuters) - The Polish zloty got a brief lift
from stronger retail sales on Tuesday as other central European
currencies slipped, while Polish bonds weakened on growing
expectations of earlier rate hikes, possibly as early as this
week, dealers said.
                                
 Polish retail sales rose 8.6 percent on an annual basis in
September, beating the 6.9 percent seen by analysts and much
higher than August's 6.6 percent rise. [ID:nLDE69P0S1]
                                
 "Clearly, the data is bringing us closer to interest rate
hikes, which may even happen tomorrow," said Przemyslaw
Winiarczyk, a dealer at Millennium bank. 
                                
 "Such a scenario would result in even stronger appreciation,
even to 3.86 (zlotys) to the euro."
                                
 As of 0924 GMT the zloty <EURPLN=> was flat against the
euro, having earlier been slightly lower on the day along with
other central European currencies.
                                
 Polish bond yields rose three to five basis points across
the curve after the data as expectations for a rate hike on
Wednesday shifted to 50/50 from 65/35, dealers said.
                                
 A recent Reuters poll showed only a slim majority of
analysts forecasting no change in borrowing costs this month.
[ID:nLDE69O17O] 
                                
 The vast majority expect the 10-member Monetary Policy
Council to raise rates by a moderate 25 basis points by the end
of 2010.
                                
 Poland's rate-setting meeting comes after Hungary's central
bank on Monday left borrowing costs flat for the sixth
consecutive month. Analysts only expect Hungary to hike rates by
the end of next year as the economy continues to struggle.
                                
 The Czech crown <ERUCZK=> and Hungary's forint <EURHUF=>
weakened 0.3 percent each against the euro, while Romania's leu
<EURRON=> eased 0.1 percent versus the common currency.
                                
 Hungary's forint hit a 5-month high at the start of October,
boosted by the government's promises to push the deficit below 3
percent of GDP, the ceiling required by the EU, by next year.
But the currency has fallen back as the details of the cabinet's
fiscal plans have seeped out.
                                
 
                                
 G20
                                
 Analysts said a group of 20 meeting over the weekend had
little, if any, impact on the overall outlook for emerging
Europe, which may benefit from the likelihood of more
quantitative easing in the United States.
                                
 RBC strategist Nigel Rendell said there was still room for
further appreciation in the region -- particularly for the zloty
and the forint -- as they still haven't come back to levels last
seen before the global crisis.
                                
 "The advantage for central Europe is that the currencies are
not as expensive as some others around the world that have
rallied strongly. We are still not back at levels we saw before
the crisis a couple of years ago," Rendell said. 
                                
 "There isn't the risk of some sort of intervention or action
to prevent capital coming in. That allows us a little more
upside."
                                
 The G20 stopped short of firm policy initiatives to counter
global currency and macroeconomic imbalances, leaving market
trends that favoured selling the dollar for emerging market
assets unchanged. [ID:nTOE69K01G]
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>  24.565   24.496  -0.28%    +7.14%
Polish zloty     <EURPLN=>   3.935    3.935      0%    +4.29%
Hungarian forint <EURHUF=> 274.42   273.53   -0.32%    -1.48%
Croatian kuna    <EURHRK=>   7.339    7.337  -0.03%    -0.41%
Romanian leu     <EURRON=>   4.271    4.268  -0.07%    -0.79%
Serbian dinar    <EURRSD=> 106.85   106.84   -0.01%   -10.27%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +1 basis points to  77bps over bmk*
7-yr T-bond   CZ7YT=RR    -5 basis points to  +77bps over bmk*
10-yr T-bond   CZ9YT=RR    -2 basis points to  +102bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +1 basis points to  +375bps over bmk*
5-yr T-bond   PL5YT=RR    -1 basis points to  +350bps over bmk*
10-yr T-bond PL10YT=RR   +1 basis points to  +314bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1124 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.

                                
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 (Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz;
editing by Hugh Lawson)