CEE MARKETS 3-FX drops; eyes on Hungary central bank

                                
  (Updates price with zloty fall)
                                
 PRAGUE, Sept 29 (Reuters) - Hungary's forint fell ahead of a
central bank policy decision on Monday, while Poland's zloty led
losses for central Europe currencies as investors eyed the
spreading financial crisis and a U.S. credit rescue plan.
The forint <EURHUF=> fell 1.1 percent to 242.55 against the
euro by 0959 GMT, while the Czech crown <EURCZK=> shed 1
percent to 24.59 per euro and Romania's leu <EURRON=> dropped
0.4 percent to 3.698 per euro.
                                
 The Polish zloty <EURPLN=> showed the biggest drop, losing
1.2 percent to 3.3951 per euro from Friday's domestic close.
                                
 Global nerves in the year-old credit crunch have hurt risk
appetite and flows of capital into emerging markets like
ex-communist central Europe. The crisis widened again on Monday,
with Belgian-Dutch group Fortis being partly nationalised.
                                
 "Volatility is still high, and moves are rapid and sudden,"
a Warsaw-based currency dealer said.
                                
 Investors have been bullish on the zloty since Poland set a
target early this month to finalise preparations for euro
adoption in 2011, with euro zone entry seen coming a year after.
                                
 However, administrative questions have arisen, and on Monday
Finance Minister Jacek Rostowski said a change in the
constitution was needed before the country could join the ERM-2
exchange rate proving ground [ID:nLT221362]. 
                                
 Countries wishing to join the euro zone must keep their
currencies within that regime for at least two years.
                                
 "What (the Finance Minister) Rostowski said about euro
adoption was very important, but today we're more witnessing a
'fight' for the fixing," the currency dealer said.
                                
 Hungary's central bank meets on Monday as a round of central
bank meetings in the region draws to a close, and is expected to
follow its Czech, Polish and Romanian counterparts by announcing
it is keeping its key rate unchanged, at 8.5 percent, at 1200
GMT. [ID:nLO418610]
                                
 Surging price growth in the past year had forced most of the
banks to tighten interest rates sharply, although price pressure
looks to have eased in recent months as a euro zone slowdown
hits demand, prompting the Czechs to even cut rates.
                                
 Dealers said they would look to Hungary's central bank
statement on Monday for signals of whether it is ready to turn
turn the corner on policy as well.
                                
 Hungarian government bonds were little changed ahead of the
decision, while in Poland bonds weakened slightly.
                                
 "The market is still concerned about stability," said Maciej
Slomka, chief dealer at Pekao in Warsaw.
                                
 Markets will watch events in the United States closely,
where lawmakers were set to vote on a $700 billion rescue plan
to clear up bad debt from jammed credit markets.
                                
 "Word is that the (U.S.) rescue package will be passed.
However, neither regional, nor broader emerging markets seem to
be overly enthusiastic about that for the time being," a
Budapest currency trader said.
                                
 
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2008 
Czech crown      <EURCZK=>   24.590   24.343  -1.01%   +7.2%
Polish zloty     <EURPLN=>    3.395    3.354  -1.22%   +5.71%
Hungarian forint <EURHUF=>  242.550  239.850  -1.13%   +4.07%
Croatian kuna    <EURHRK=>    7.106    7.105  -0.01%   +3.01%
Romanian leu     <EURRON=>    3.698    3.682  -0.43%   -3.29%
Serbian dinar    <EURRSD=>   76.530   76.558  +0.04%   +2.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +31 basis points to  36bps over bmk*
5-yr T-bond   CZ5YT=RR   +29 basis points to  +30bps over bmk*
10-yr T-bond  CZ9YT=RR   +17 basis points to  +42bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +38 basis points to  +284bps over bmk*
5-yr T-bond   PL5YT=RR   +28 basis points to  +230bps over bmk*
10-yr T-bond  PL10YT=RR  +16 basis points to  +179bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +33 basis points to  +582bps over bmk*
5-yr T-bond   HU5YT=RR   +29 basis points to  +531bps over bmk*
10-yr T-bond  HU10YT=RR  +17 basis points to  +389bps over bmk*
*Benchmark is German bond equivalent.
All currency data taken from Reuters at 1159 CET.
All bond data taken from Reuters at 0952 CET.
Currency percent change calculated from the daily domestic 
close at 1500 GMT.
                                
 
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 (Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Ruth Pitchford)