CEE MARKETS 2-Forint leads gains, leu flat as politics weighs

                                
* Stronger risk appetite gives support to regional assets
                                
 * Leu lags as political crisis drags on, IMF on standby
                                
 * Czech inflation dips into negative, bond yields lower 
                                
 
                                
 BUDAPEST, Nov 9 (Reuters) - The Hungarian forint led
regional gains in emerging Europe on Monday, as a stronger
global risk appetite gave support to most currencies, but the
Romanian leu underperformed due to political strains.
                                
 The leu <EURRON=> gained 0.1 percent, lagging behind the
forint <EURHUF=>, which was 0.7 percent firmer at 1006 GMT, as
well as the Czech crown <EURCZK=> and the Polish zloty
<EURPLN=>, which were 0.5 percent stronger each.
                                
 "The euro/dollar has broken through, so the dollar is weaker
and pushing emerging markets higher," a Prague dealer said. "We
haven't seen anything significant out of fundamentals lately."
                                
 "Risk appetite is back," a dealer in Budapest added. "We
will probably creep back to levels seen before last week's
weakening."
                                
 Romania's political gridlock might hold the leu back as
Prime Minister designate Liviu Negoita unveils a cabinet line-up
on Monday with little chance of Parliament's approval.
                                
 The stalemate prompted the IMF on Friday to withhold funds
that were slated for Romania next month. [ID:nL6727605]
                                
 Dealers in Bucharest say the currency has been stuck in very
tight ranges due to covert central bank interventions this year.
                                
 "The market fears a new intervention," one Bucharest-based
dealer said.
                                
 Romanian industrial production contracted at its slowest
rate in a year, data showed on Monday. [ID:nL9315464]
                                
 Czech inflation dipped into negative territory in October,
although the -0.2 percent annual figure is milder than a
forecast of -0.3 percent from the central bank, which kept rates
at a record low of 1.25 percent last week. [ID:nL9689047]
                                
 The Czech central bank is likely to lose its governor as
Prime Minister Jan Fischer nominated Zdenek Tuma to be Prague's
next European Commissioner. [ID:nL8153705]
                                
 In Poland, a central banker said on Monday that the zloty
was expected in a tight range around the euro until the end of
2009, and that Poland would not enter the Exchange Rate
Mechanism, the euro anteroom, before 2011. [ID:nL9356803]
                                
 
                                
 BONDS YIELDS DROP
                                
 Regional bond markets took some of the same cues as the
currencies and mostly gained, although yields only fell by a few
basis points from Friday's levels.
                                
 "The market is positioned to post more gains, the bid side
is strong," a dealer in Budapest said. "That said, I expect
volatile trading dictated by overseas investors for the rest of
the year, and yields not markedly lower than now.
                                
 Short-end yields in Hungary dropped and again approached the
7 percent mark seen in previous weeks. 
                                
 Czech bonds also showed limited downside risk, dealers said,
after markets corrected upward last week.
                                
 Polish bond yields were flat.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  25.614   25.736   +0.48%   +4.45%
Polish zloty     <EURPLN=>   4.227    4.248   +0.5%    -2.65%
Hungarian forint <EURHUF=>   272.8   274.68   +0.69%   -3.39%
Croatian kuna    <EURHRK=>   7.262    7.268   +0.08%   +1.42%
Romanian leu     <EURRON=>   4.293    4.297   +0.09%   -6.49%
Serbian dinar    <EURRSD=>  93.448    93.74   +0.31%   -4.25%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +3 basis points to  +108bps over bmk*
7-yr T-bond   CZ7YT=RR   +1 basis points to  +104bps over bmk*
10-yr T-bond  CZ10YT=RR  -8 basis points to  +92bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +4 basis points to  +367bps over bmk*
5-yr T-bond   PL5YT=RR   +4 basis points to  +318bps over bmk*
10-yr T-bond PL10YT=RR   +1 basis points to  +277bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +3 basis points to  +533bps over bmk*
5-yr T-bond   HU5YT=RR   +4 basis points to  +470bps over bmk*
10-yr T-bond   HU10YT=RR +1 basis points to  +404bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1106 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
 (Reporting by Marton Dunai; editing by Toby Chopra/Ruth
Pitchford)