CEE MARKETS 3-FX extends rally, crown lags behind

                                
 * Forint top gainer with 0.6 pct rise
                                
 * Czechs pick new finance minister, gridlock seen easing
                                
 * Poland's 2010 budget outline seen with growth 0.5-1.3 pct
                                
 
 (Updates prices, quotes)
                                
 By Balazs Koranyi and Dagmara Leszkowicz
                                
 BUDAPEST/WARSAW, May 5 (Reuters) - Global appetite for risk
kept Central Europe's currencies on firmer ground on Tuesday,
but dealers said upside potential would be limited due to recent
sharp gains and concerns over the region's economic outlook. 
                                
 Hungary's forint <EURHUF=> was one of the day's biggest
movers with more than 0.6 percent gain after the government
passed tax rises and pension cuts that are vital to keep a lid
on its budget deficit in a still deepening recession.
                                
 The forint has firmed over 5.5 percent over the past seven
trading sessions on improved global risk appetite and an easing
of political risk after the country's new government began to
implement its programme.
                                
 The Polish zloty <EURPLN=> lost ground in early trade as
London markets came back on line after the European Commission
predicted on Monday, a bank holiday in the UK, that the Polish
economy would contract this year -- in contrast to government
forecasts.
                                
 But markets later shrugged off the bad news, trading in
positive territory, and even a more pessimistic growth forecast
from the government for the next year failed to hit the unit.
                                
 "This is a short-term rally and as long as there's no
crucial data publication, currencies are gaining," said Lukasz
Wojtkowiak, FX analyst at Millennium Bank in Warsaw. 
                                
 "Investors will be watching closely any data publication
here, especially growth figure for the first quarter."
                                
 Earlier in the day one of the country's central bank's
Monetary Policy Council (MPC) members said the growth could be
up to 1 percent this year, echoing most analysts' forecasts of
0.8 percent expansion in 2009. [ID:nWAR008265]
                                
 Poland's government approved on Tuesday an initial budget
outline for the next year, saying economic growth could be at
0.5-1.3 percent.[ID:nWAR008268]. 
                                
 The analyst also said sharp rises on Prague's and Budapest's
stocks also supported the currencies. "But the situation overall
is nervous and it is not a strong support," he said.
                                
 
                                
 GRIDLOCK
                                
 Signs of an easing in political gridlock in the Czech
Republic with the nomination budget expert Eduard Janota as new
finance minister did little to excite markets. [ID:L5545255]
                                
 "It is good news but for markets it's not a significant
piece of news," said Miroslav Plojhar, EMEA economist at JP
Morgan in London. 
                                
 "The spread of Czech bonds against swaps is linked to the
fact that the finance ministry, with or without Janota, must
issue much more debt than planned."
                                
 Czech bonds were a touch down on Tuesday after the ministry
released a heavy June issuance plan on Monday. [ID:nL4596561]
                                
 Romania's leu was among top currency gainers, touching
20-day highs following better sentiment in the region.
                                
 "The leu has been tracking the region ... we've seen London
and New York selling activity," said one dealer said with a
foreign bank in Bucharest.
                                
 Dealers said there was no major impact from a formal
approval of a $17 billion stand-by loan for Romania to cushion
the effects of a sharp drop in capital inflows resulting from
the global financial crisis [ID:nN04410969].
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.503   26.475  -0.11%    +0.94%
Polish zloty     <EURPLN=>    4.344    4.362  +0.41%    -5.27%
Hungarian forint <EURHUF=>  283.2    285.04   +0.65%    -6.94%
Croatian kuna    <EURHRK=>    7.405    7.41   +0.07%    -0.54%
Romanian leu     <EURRON=>    4.158    4.183  +0.6%     -3.45%
Serbian dinar    <EURRSD=>   94.699   94.71   +0.01%    -5.51%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +9 basis points to  174bps over bmk*
4-yr T-bond   CZ4YT=RR   +5 basis points to  +202bps over bmk*
8-yr T-bond   CZ8YT=RR   +13 basis points to  +293bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +5 basis points to  +413bps over bmk*
5-yr T-bond   PL5YT=RR   +4 basis points to  +340bps over bmk*
10-yr T-bond PL10YT=RR    0 basis points to  +296bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -18 basis points to  +871bps over bmk*
5-yr T-bond   HU5YT=RR    -55 basis points to  +780bps over bmk*
10-yr T-bond   HU10YT=RR  -46 basis points to  +677bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1507 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Balazs Koranyi and Dagmara Leszkowicz; Editing
by Victoria Main)