CEE MARKETS 3-Polish bonds down after retail data, FX cut losses

                                
 * FX, stocks rebound from early losses
                                
 * Zloty gains, bonds fall after strong retail data
                                
 * Forint set for 2nd straight weekly gain
                                
     
 (Updates prices, adds Polish cbank preview)
                                
 By Jason Hovet
                                
 PRAGUE, Sept 24 (Reuters) - Polish bonds weakened and the
zloty rose on Friday after upbeat retail sales data raised the
likelihood of a rate rise this year, while the Hungarian forint
hit a five-week high.
                                
 The zloty, however, was still set to be the only loser among
central European currencies on the week though as investors were
discouraged earlier in the week when the finance ministry raised
its budget deficit forecast for this year.
                                
 A rise in the German Ifo business sentiment index boosted
stock markets across the region, which reversed morning losses
although concerns about the global economy remain.
                                
 Central Europe's export-reliant economies are counting on
growing foreign demand to lift production, but the pace of their
export recovery looks set to slow towards the end of the year.
                                
 In Poland, August retail sales rose 6.6 percent year-on-year
and unemployment eased, adding to expectations of higher
interest rates ahead. [ID:nLDE68M21H]
                                
 "This is an argument for those on the MPC (Monetary Policy
Council) supporting rate hikes but it is not very convincing,"
said Rafal Benecki, senior economist at ING Bank in Warsaw.
                                
 The zloty <EURPLN=> won back half percent losses to bid
0.2 percent up on the day at 3.96 per euro, firming from a
September low around 3.983 per euro hit in the previous session.
                                
 Bond yields rose by up to 3 basis points as the retail sales
data followed on the heels of central bank minutes, released on
Thursday, showing rate setters at their August meeting discussed
-- but did not pass -- a 50 basis point rate rise, larger than
markets had expected. [ID:nLDE68M18A]
                                
 
                                
 WHEN TO TIGHTEN
 In a Reuters poll released on Friday, 27 of 28 analysts
forecast the bank will hold rates at a meeting next week. Dovish
comments, particularly from Governor Marek Belka, have cooled
some expectations for a quick rate rise. [ID:nLDE68N161]
                                
 The Czech central bank kept interest rates flat on Thursday
as expected and stuck to its outlook for stable policy although
one board member advocated a rate hike, the first call for
tighter policy in more than two years. [ID:nLDE68L0F6]
                                
 Hungary's central bank meets on Monday and analysts expect
rates to stay flat but will be watching for any signals the bank
could rise rates later this year. [ID:nLDE68L28B] 
                                
 The forint <EURHUF=> led gains on Friday with a 0.5 percent
rise to 277.97 to the euro, bringing gains this week to 1.6
percent on news of large automotive sector investments and
government pledges to cut the 2011 budget.
                                
 The Czech crown <EURCZK=> was steady and the Romanian leu
<EURRON=> added 0.5 percent.
                                
 German car maker Audi AG <NSUG.DE> announced on Thursday it
would spend 900 million euros by 2013 in a car factory in
western Hungary. The news followed an announcement this week by
General Motors (GM) [GM.UL] that it would invest 500 million
euros to expand capacity in Hungary. [ID:nLDE68M1N8]
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>   24.597   24.598   0%      +7%
Polish zloty     <EURPLN=>    3.96     3.967  +0.18%   +3.64%
Hungarian forint <EURHUF=>  277.97   279.55   +0.57%   -2.74%
Croatian kuna    <EURHRK=>    7.291    7.287  -0.05%   +0.25%
Romanian leu     <EURRON=>    4.24     4.259  +0.45%   -0.06%
Serbian dinar    <EURRSD=>  105.35   105.307  -0.04%   -8.99%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -2 basis points to  102bps over bmk*
7-yr T-bond   CZ7YT=RR    -3 basis points to  +96bps over bmk*
10-yr T-bond   CZ9YT=RR    -2 basis points to  +111bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -1 basis points to  +400bps over bmk*
5-yr T-bond   PL5YT=RR   +6 basis points to  +363bps over bmk*
10-yr T-bond PL10YT=RR    -3 basis points to  +317bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -11 basis points to  +573bps over bmk*
5-yr T-bond   HU5YT=RR    -8 basis points to  +528bps over bmk*
10-yr T-bond   HU10YT=RR  -12 basis points to  +454bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1554 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 Susan Fenton)