CEE MARKETS 3-Stocks extend year-end gains, currencies edge up

                                
 * Stock rally keeps going, currencies slightly firmer
                                
 * Romania court backs budget, IMF laws, leu steady
                                
 * Analysts see more room for crown weakening
                                
 
                                
 (Adds Romania court decision, updates prices)
                                
 PRAGUE/BUCHAREST, Dec 28 (Reuters) - Central European stocks
extended a year-end rally on Tuesday, helping currencies edge up
in thin trade, while Romania's leu ignored a court decision to
back IMF-mandated bills.
                                
 Central European stock markets have broadly gained
throughout December thanks to an improving economic outlook.
                                
 But China's latest rate rise has taken some of the shine
off, as investors worry that tighter monetary policy in the
economic powerhouse could moderate the global economic recovery.
                                
 After a dip on Monday following the Chinese move, stocks
were up on Tuesday, led by Prague <.PX> with a 0.8 percent rise
and Bucharest <.BETI> with a 0.5 percent rise.
                                
 At 1415 GMT, The Hungarian forint <EURHUF=> and the Czech
crown <EURCZK=> were up 0.1 percent on the day, while the Polish
zloty <EURPLN=> dipped 0.3 percent.
                                
 Romania's Constitutional Court backed the government's 2011
austerity budget and a key public wages reform bill on Tuesday,
effectively removing the last obstacle in the way of the next
tranche from the International Monetary Fund. [ID:nLDE6BR0OB]
                                
 The leu <EURRON=> failed to react on the news as the
decision had been widely expected.
                                
 The Romanian government's reforms and its strengthening
position after surviving two no-confidence motions this month
have boosted demand for the country's debt, with yields dropping
at a tender of one-year paper on Monday. [ID:nLDE6BQ0UT]
                                
 While the leu may gain early next year ahead of the aid
disbursement worth 2.1 billion euros as volumes pick up,
political uncertainty will likely dominate throughout next year
as well.
                                
 Prime Minister Emil Boc struggles with strong public
discontent, while the once booming economy still lingers in
recession, lagging the rest of the region.
                                
 "Things look better going into next year, but it is not over
yet," one Bucharest-based dealer said
                                
 
                                
 SLOW MOVES
                                
 On bond markets, Hungarian yields were flat. Dealers said a
three-month treasury bill auction appeared to have ended with
just one buyer taking all 40 billion forints of bills on offer.
"It looks very much like it was a single buyer," a dealer
said after the auction. [ID:nBUD005666]
                                
 Markets expect the Polish finance ministry to try to keep
the zloty firm before a Dec. 31 fixing to avoid breaching debt
levels that, if passed, would trigger spending cuts. Almost a
quarter of Polish debt is in foreign currencies. [ID:nLDE6B91CT]
                                
 Market sources have told Reuters over the past week that
Poland's state-owned BGK bank was offering euros on the market.
                                
 The crown, hurt by region-low interest rates and a
correction to a rally earlier in the year, is the only currency
in central Europe to have lost ground this month, falling 1.8
percent.
                                
 Erste Bank technical analysts said on Monday the crown would
weaken a bit further but that room was limited.
                                
 "Overbought conditions and weakening upward momentum (in the
exchange rate) are increasing the likelihood of correction, but
there may be some limited room for further weakening of
(the crown) up to the 25.45 level," it said in a regular note.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>  25.323   25.345   +0.09%    +3.93%
Polish zloty     <EURPLN=>   3.986    3.974   -0.3%     +2.96%
Hungarian forint <EURHUF=> 278.82   279.2     +0.14%    -3.04%
Croatian kuna    <EURHRK=>   7.385    7.365   -0.27%    -1.03%
Romanian leu     <EURRON=>   4.287    4.285   -0.05%    -1.16%
Serbian dinar    <EURRSD=> 105.58   106.24    +0.63%    -9.19%

Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -15 basis points to  78bps over bmk*
7-yr T-bond   CZ7YT=RR   +2 basis points to  +81bps over bmk*
10-yr T-bond   CZ9YT=RR   +4 basis points to  +91bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +8 basis points to  +660bps over bmk*
5-yr T-bond   HU5YT=RR   +6 basis points to  +593bps over bmk*
10-yr T-bond   HU10YT=RR +5 basis points to  +493bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1615 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 and
Marius Zaharia, editing by Ron Askew)