CEE MARKETS 2-FX weaker on mix of factors, Polish output eyed

                                
h    * Year-end volatility, Greece, strong USD to weigh on
region
                                
 * Romanian PM candidate seen facing difficulties, leu dips
                                
 * Hungarian cbank seen cutting rates by 50 bps again
                                
 * Polish November output eyed
                                
 
                                
 (Adds bonds, updates markets)
                                
 By Marton Dunai
                                
 BUDAPEST, Dec 17 (Reuters) - East Europe's currencies were
weaker on Thursday as optimistic Fed comments strengthened the
dollar overnight, and seasonal profit-taking and investor fears
of a spillover from Greece weighed on markets, dealers said.
                                
 "The next few days will be about lower liquidity and higher
volatility," a dealer said in Budapest. "We will keep testing
current support levels and if we don't break through now, we
probably will later."
                                
 In the short term, "the 280 level in the euro/forint and
4.22 in the zloty are strong technical points and after the
illiquid morning stretch is behind us, I don't see much further
weakening today," another Budapest dealer said.
The Hungarian forint <EURHUF=> and the Polish zloty
<EURPLN=> each eased about a half a percent at 1047 GMT.
                                
 A Reuters poll showed that most analysts expect the
Hungarian central bank (NBH) to cut its base rate again by 50
basis points to 6.5 percent on Monday.[ID:nLDE5BF2GT]
                                
 The Czech crown was flat after a surprise rate cut led to
its underperforming on Wednesday; corporate orders now created a
floor for its weakening, dealers said. [ID:nLDE5BF161].
                                
 "A resistance preventing the crown from more weakening is
based on selling orders of corporate clients," said David
Sykora, an FX trader at bank CSOB.
                                
 The Romanian leu <EURRON=> was a touch weaker, giving up 0.1
percent after newly re-elected President Traian Basescu
nominated interim Prime Minister Emil Boc to head a new
government. [ID:nLDE5BG0D1]
                                
 Analysts said Boc had political baggage that could make
long-term transformation difficult.
                                
 "He has already been rejected once (in a confidence vote in
parliament), so he might prove to be a difficult choice in terms
of support," said BNP Paribas analyst Elisabeth Gruie. "It could
create even more political stalemate."
                                
 "It is crucial to see how much political support he will
garner," she added. "A broad political mandate... is crucial for
the IMF deal and pushing reforms going forward."
                                
 Following a knife-edge run-off victory on Dec. 6, Basescu
negotiated with parties on forming a new government to end a
political crisis that had stalled a 20 billion euro ($29.07
billion) rescue loan package. [ID:nLDE5BF0A4]
                                
 The European Commission said on Thursday Romania had made
progress towards meeting fiscal goals.[ID:nWEA6015]
                                
 
                                
 POLISH OUTPUT EYED
                                
 The zloty, which some analysts expect to outperform the
region in the medium term, could find support in November
industrial output figures due out later on Thursday, Bank BPH
wrote in a morning note. 
                                
 "We expect that some kind of support for the zloty could be
provided by today's industrial production figures if they prove
above consensus," BPH wrote.
                                
 Danske Bank said it expected industrial production at 9.2
percent, above the consensus. 
                                
 "Underlying improvement in industrial production is becoming
more visible in the hard data," Danske said in a note to
clients.
                                
 Bond yields rose slightly regionwide, also reflected by a
government bond auction in Hungary, where yields rose by some 50
basis points since the last auction two weeks ago, and the debt
management agency AKK trimmed the offer in the 5-year segment by
5 billion forints. [ID:nEAP000702]
 --------------------------MARKET SNAPSHOT--------------------
 Currency                    Latest   Previous Local    Local
                                
                                   close    currency currency
                                
                                            change   change
                                
                                            today    in 2009 
 Czech crown      <EURCZK=>  26.228   26.234   +0.02%   +2%
 Polish zloty     <EURPLN=>   4.197    4.177   -0.48%   -1.95%
 Hungarian forint <EURHUF=> 278.42   276.93    -0.54%   -5.34%
 Croatian kuna    <EURHRK=>   7.288    7.288    0%      +1.06%
 Romanian leu     <EURRON=>   4.224    4.219   -0.12%   -4.96%
 Serbian dinar    <EURRSD=>  96.22    95.72    -0.52%   -7%
                                
 Yield Spreads
 Czech treasury bonds <0#CZBMK=>
 3-yr T-bond   CZ3YT=RR  -14 basis points to  +110bps over bmk*
 7-yr T-bond   CZ7YT=RR   +5 basis points to  +95bps over bmk*
 10-yr T-bond  CZ10YT=RR  +1 basis points to  +83bps over bmk*
 Polish treasury bonds <0#PLBMK=>
 2-yr T-bond   PL2YT=RR   +6 basis points to  +396bps over bmk*
 5-yr T-bond   PL5YT=RR   +7 basis points to  +372bps over bmk*
 10-yr T-bond PL10YT=RR   +7 basis points to  +310bps over bmk*
 Hungarian treasury bonds <0#HUBMK=>
 3-yr T-bond   HU3YT=RR   +6 basis points to  +589bps over bmk*
 5-yr T-bond   HU5YT=RR   +7 basis points to  +547bps over bmk*
 10-yr T-bond  HU10YT=RR  +5 basis points to  +479bps over bmk*
 *Benchmark is German bond equivalent.
 All data taken from Reuters at 1147 CET.
 Currency percent change calculated from the daily domestic

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 (Reporting by Marton Dunai; editing by Stephen Nisbet)