CEE MARKETS 3-U.S payrolls help CEE units, ECB in focus

                                
 * FX recovered earlier losses on U.S payrolls data
                                
 * ECB rate hike signals limit gains
                                
 * Hungary to revamp cbank Monetary Council on Monday
                                
 
                                
 (Updates throughout)
                                
  By Jason Hovet and Pawel Bernat
                                
 PRAGUE/WARSAW, March 4 (Reuters) - Central European
currencies recouped earlier losses against the euro on Friday
afternoon as strong U.S. payrolls data offset the impact of
signals from the European Central Bank that it may raise
interest rates soon.
                                
 U.S. employers hired the highest number of workers since May
last year while the unemployment rate fell to a near two-year
low, strengthening appetite for riskier assets in emerging
economies like those in the former communist region.
                                
 The prospect of the ECB raising rates as soon as next month
earlier drove all of the region's currencies lower against the
euro, although there were also gains against the dollar for most
of the currencies, which tend to be helped by a strong euro.
                                
 The zloty <EURPLN=> and Hungary's forint <EURHUF=> were
little changed against the euro by 1506 GMT, hovering around
200-day moving average. The Czech crown <EURCZK=> and Romania's
leu <EURRON=> each fell some 0.1 percent.
                                
 Against the dollar, the zloty gained almost half a percent
while the crown rose 0.4 percent and the forint 0.2 percent.
                                
 "Payrolls data were good and they calmed down markets
somewhat," said Karol Zaluski, chief dealer at ING bank in
Warsaw. "We (also) had some traditional closing of short zloty
positions ahead of the weekend."
                                
 
                                
 FRA UP
                                
 While the currencies may suffer against the euro, their
broader strength also tends to be closely tied to the single
currency, not least because higher euro zone interest rates tend
to pressure domestic central banks to follow.
                                
 Czech 3x6 forward rate agreements (FRA) <CZK3X6F=>,
indicating 3-month interest rates in three months time, rose to
a one-year high and point to more than a quarter-point hike by
the central bank by early June. <CZKFRA> <PRIBOR=>
                                
 Hungary's FRA instruments also price in a small chance for a
quarter-point rate hike this year, even though parliament is
seen appointing rate setters on Monday who will take policy on a
more accommodative tack. [ID:nLDE72218T]
                                
 Polish FRAs price in four 25 basis point rate hikes by the
end of the year bringing the main rate to 4.75 percent,
something several policymakers had previously said was overdone.
                                
 Hungary's new rate setters to be named and appointed in the
next few days will not have much room to lower rates even though
they arrive with a mandate to soften policy, dealers said.
                                
 A Moody's rating agency official said late on Thursday that
the Hungarian government measures were supportive for the rating
but that implementation and growth risks remained -- pointing to
risks to the forint if rates were lower. [ID:nLDE7222E4]
                                
 "The structural reforms could also fuel inflation... and
then it will be very difficult to cut rates," one bond trader
said. "It's possible, but that would have a price in the forint
exchange rate."#
                                
 Elsewhere, Romania's central bank is increasingly expected
to confound expectations of a rate cut this year as it struggles
with imported inflation. [ID:nLDE71O05N]
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011 
Czech crown      <EURCZK=>  24.277   24.254   -0.09%   +2.98%
Polish zloty     <EURPLN=>   3.981    3.98    -0.03%   -0.58%
Hungarian forint <EURHUF=> 271.25   271.25        0%   +2.48%
Croatian kuna    <EURHRK=>   7.405    7.413   +0.11%   -0.34%
Romanian leu     <EURRON=>   4.204    4.201   -0.07%   +0.69%
Serbian dinar    <EURRSD=> 103.673  103.91    +0.23%   +2.17%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +1 basis points to  3bps over bmk*
7-yr T-bond   CZ7YT=RR   +2 basis points to  +72bps over bmk*
10-yr T-bond   CZ9YT=RR   +6 basis points to  +80bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +1 basis points to  +328bps over bmk*
5-yr T-bond   PL5YT=RR   +6 basis points to  +328bps over bmk*
10-yr T-bond PL10YT=RR   +5 basis points to  +300bps over bmk*
The P
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +2 basis points to  +470bps over bmk*
5-yr T-bond   HU5YT=RR   +6 basis points to  +457bps over bmk*
10-yr T-bond   HU10YT=RR +7 basis points to  +402bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1606 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 Pawel
Bernat; editing by Patrick Graham)