CEE MARKETS 2-Forint leads modest gains; cbanks in focus

                                
 * Poland to raise rates first, followed by Hungary
                                
 * Polish rate hike seen later than thought before
                                
 * Currencies undeterred by tightening in China
                                
 
 (Adds bonds, quotes)
                                
 By Robert Mueller
                                
 PRAGUE, Nov 19 (Reuters) - A weaker dollar gave a slight
boost to emerging Europe currencies on Friday, while the focus
turned to central bank meetings as Polish policymakers suggested
there may not be backing for an expected early rate rise.
                                
 Emerging European assets were again held back by uncertainty
over a rescue plan for Ireland, whose debt and deficit problems
have threatened to spill over into other indebted euro zone
periphery countries. [ID:nLDE6AI0QG]
                                
 Currencies in the region paid virtually no attention to the
news that China had raised bank reserve requirements by 50 basis
points for the second time in two weeks, stepping up its battle
against potential inflation.[ID:nL3E6MJ0N8]
                                
 The forint <EURHUF=> rose 0.4 percent to lead gains, while
the zloty <EURPLN=> was flat ahead of industrial output figures
due later in the day, one of the last data releases before the
central bank starts a two-day rate-setting meeting next week.
                                
 The market has scaled back bets that the 10-strong Polish
Monetary Policy Council will kick off a tightening cycle this
month after comments from policymakers suggested there may not
be a majority to back a rate increase.
                                
 Analysts expect Poland to be the first to begin undoing two
years of loosening interest rates in central Europe to fight off
economic recession, with Hungary seen as second in line.
                                
 "If the output is clearly above the consensus, it will
affect the market," said Marek Kaczor, fixed income dealer at
PKO BP. "Because the council is split over the decision on
rates, every macro figure is important now."
                                
 
                                
 HUNGARIAN INFLATION
                                
 A Hungarian central banker told Reuters late on Thursday
that its new inflation report, due out this month, would provide
rate-setters with key clues about outlook changes, and said they
will act if the inflation target is threatened. [ID:nLDE6AI07N]
                                
 Wage growth picked up in Hungary in September, but not by
enough to influence monetary policy, analysts said. Markets will
be watching the central bank's assessment of new government
taxes and tax cuts, which it has already said look inflationary.
                                
 Yields on Hungarian bonds rose to 10-week highs earlier this
week and have stayed close to those levels as the market remains
vulnerable to news about the European Union debt crisis.
                                
 The government sold 68.5 billion forints worth of bonds at
auctions on Thursday, well above the 45 billion forint plan,
with strong demand on the short end of the curve but
disappointing bids for the 10-year paper. [ID:nLDE6AH101]
                                
 The Czech crown <EURCZK=> and Romanian leu <EURRON=> were
flat on the day.
                                
 "It looks like some relief is coming into the region as the
dollar is back on the weak foot," a dealer in Prague said.
"Euro/dollar has been reversing up in last few sessions and is
set to see higher levels again. All this is helping regional
currencies to strengthen a bit."
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>  24.609    24.613  +0.02%   +6.94%
Polish zloty     <EURPLN=>   3.939     3.939   0%      +4.19%
Hungarian forint <EURHUF=> 273.85    275.03   +0.43%   -1.28%
Croatian kuna    <EURHRK=>   7.39      7.394  +0.05%   -1.09%
Romanian leu     <EURRON=>   4.296     4.297  +0.02%   -1.36%
Serbian dinar    <EURRSD=> 106.62    106.85   +0.22%   -10.07%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -1 basis points to  +66bps over bmk*
7-yr T-bond   CZ7YT=RR    -3 basis points to  +64bps over bmk*
10-yr T-bond  CZ9YT=RR    -3 basis points to  +90bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -3 basis points to +572bps over bmk*
5-yr T-bond   HU5YT=RR    +1 basis points to +535bps over bmk*
10-yr T-bond   HU10YT=RR  +4 basis points to +464bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1221 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
                                
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  (Reporting by Reuters bureaus, writing by Jason Hovet/Robert
Mueller, editing by Catherine Evans)