CEE MARKETS 3-FX firm on Ifo, mkts eye Hungarian cbank

                                
 * Dollar retreat, German Ifo lift CEE currencies
                                
 * Mkts eye Hungary rate meeting, Romania govt developments
                                
 
 (Updates throughout)
                                
 By Sandor Peto and Marius Zaharia
                                
 BUDAPEST/BUCHAREST, Dec 18 (Reuters) - Central European
currencies firmed on Friday, supported by dollar weakness and 
improved sentiment in the region's main trading partner Germany,
and investors were eyeing a Hungarian rate meeting next week.
                                
 Regional markets were under pressure this week from fears
over Greek debt and end-year profit taking and investors headed
into next week expecting a 50 basis points rate cut in Hungary
on Monday and monitoring political developments in Romania.
                                
 At 1437 GMT, the Hungarian forint <EURHUF=> was 0.6 percent
stronger, the Polish zloty <EURPLN=> was 0.3 percent firmer, and
the Romanian leu <EURRON=> was up 0.1 percent, while the Czech
crown <EURCZK=>, hit by a surprise rate cut earlier this week,
was a touch weaker.
                                
 "The region will be driven by risk appetite by the end of
the year, unless surprise moves come up," one dealer in
Bucharest said.
                                
 Meanwhile, the market mood was improved by good Ifo
corporate sentiment figures from Germany [ID:nLDE5BH0OZ].
                                
 In Romania, markets were eyeing Prime Minister designate
Emil Boc's plans to form a government after the victory of
Traian Basescu in a presidential election earlier this month.
                                
 A government source said former Finance Minister Sebastian
Vladescu has agreed to take over from acting minister Gheorghe
Pogea [ID:nBUC003584].
                                
 A recent Reuters poll showed the zloty was seen
outperforming next year, followed by the crown. [ID:nGEE5B229H]
                                
 Equities were mixed. The Polish stock index <.WIG20> shed
about half a percent, while Czech <.PX> and Hungarian <.BUX>
stocks were virtually flat, as Goldman Sachs recommended
investors buy Hungarian blue chip MOL <MOLB.BU>. [ID:nWNBB2741]
                                
 
                                
 FISCAL CONCERNS, RATE DECISION
                                
 Late on Wednesday S&P became the second rating agency this
month to downgrade Greece. A spate of bad news about the budgets
of states in the euro zone's periphery in recent weeks has also
caused jitters in recession-hit Central Europe.
                                
 "Greece still appears to be the hottest story in the market
-- more bad news out of Greece is likely to continue to
weigh on the EMEA markets," Danske Bank said in its daily
regional note.
                                
 Fiscal slippage remains a key risk in the European Union's
eastern members, where economic problems and elections next year
could sap reforms and may push some states towards a Greek-style
debt trap. [ID:nLDE5BE0UL]
                                
 Government bond prices changed little in the region on
Friday after a retreat in past weeks as the appetite of foreign
investors weakened ahead of the year-end.
                                
 Polish 10-year bond yields have risen 10 basis points in
December, and the corresponding Hungarian yields have risen 50
basis points in the past month.
                                
 Dealers said Polish bond prices would remain under pressure
as investors are pricing in expected large debt issues in 2010.
Poland's borrowing needs may be 25 percent higher in 2010 than
in 2009, when they stood at about 160 billion zlotys.
                                
 Hungary's debt agency confirmed on Friday that its 2010
forint issuance plan would rely on domestic demand rather than
foreign capital inflows. [ID:nLDE5BG1OG]
                                
 The country's markets brushed off the news, instead looking
ahead to Monday's rate-setting meeting. [ID:nLDE5BF2GT]
                                
 "A decision not to cut rates by 50 bps would lead to slight
upwards correction in short-end yields," one trader said.
                                
 Other traders said a 25 basis point cut was priced in by
forward rate agreements, and a cut of that size would not have
any significant market impact.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  26.287   26.244   -0.16%    +1.77%
Polish zloty     <EURPLN=>   4.192    4.205   +0.31%    -1.84%
Hungarian forint <EURHUF=> 276.75   278.4     +0.6%     -4.77%
Croatian kuna    <EURHRK=>   7.28     7.288   +0.11%    +1.17%
Romanian leu     <EURRON=>   4.207    4.213   +0.14%    -4.58%
Serbian dinar    <EURRSD=>  96.04    95.71    -0.34%    -6.83%
 Yield Spreads
 Czech treasury bonds <0#CZBMK=>
 3-yr T-bond   CZ3YT=RR    +7 basis points to  117bps over bmk*
 7-yr T-bond   CZ7YT=RR   +11 basis points to  +107bps over bmk*
 10-yr T-bond  CZ10YT=RR   -1 basis points to  +83bps over bmk*
 Polish treasury bonds <0#PLBMK=>
 2-yr T-bond   PL2YT=RR    -3 basis points to  +392bps over bmk*
 5-yr T-bond   PL5YT=RR    -2 basis points to  +371bps over bmk*
 10-yr T-bond PL10YT=RR     0 basis points to  +313bps over bmk*
 Hungarian treasury bonds <0#HUBMK=>
 3-yr T-bond   HU3YT=RR    0 basis points to  +589bps over bmk*
 5-yr T-bond   HU5YT=RR    -2 basis points to  +541bps over bmk*
 10-yr T-bond  HU10YT=RR +1 basis points to  +476bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1637 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
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 (Reporting by Sandor Peto and Marius Zaharia; Editing by Hugh
Lawson and Stephen Nisbet)