CEE MARKETS-Forint lags as FX weaken on euro zone worries

                                
 * FX drop on euro zone debt worries, HUF underperforms
                                
 * Poland seen hiking rates, overshooting 2010 deficit
                                
 * Czech inflation tops forecasts, investors unfazed
                                
 
                                
 BUDAPEST, Jan 10 (Reuters) - Emerging European currencies
opened weaker on Monday as euro zone debt concerns kept
investors on edge, with the Hungarian forint, seen the most
vulnerable to fiscal worries, taking the biggest hit.
                                
 Pressure was growing on Portugal to turn to the European
Union and the International Monetary Fund for financial help to
avert further damage to the euro zone, a senior source said on
Sunday, although talks were not yet under way. [ID:nLDE7080FG]
                                
 The resulting pressure on the euro deflated asset prices in
emerging Europe, while the dollar's strength, usually seen as an
indicator of risk aversion, added to pessimism, dealers said.
Local news have not factored into the weakening, they said.
                                
 "The European debt financing problems add to a general
investor unease, and the forint is seen as the most vulnerable
unit in the region," one Budapest-based dealer said. "Of course
the dollar's strength is another ballast here, too."
                                
 Hungary's assets have suffered after a string of unorthodox
fiscal moves by the government left the fiscal outlook cloudy,
prompting two credit rating downgrades late last year.
                                
 Investors turned away from the forint despite a November
trade surplus that beat expectations and indicated healthy
export-based growth ahead. [ID:nLDE70909T]
                                
 The forint <EURHUF=> dropped half a percent from Friday's
closing levels against the euro and remained close to its
all-time lows against the Swiss franc <CHFHUF=>, the funding
unit of the country's large stock of foreign currency loans.
                                
 The Czech crown <EURCZK=>, the region's top performer in
2010, dipped 0.1 percent, as did the Polish zloty <EURPLN=>,
which got a recent boost from rate hike expectations.
                                
 After repeated rate-setter comments indicating an imminent
rate hike cycle in Poland, another central banker was quoted
over the weekend as saying that recent inflation forecasts
necessitated rate hikes. [ID:nLDE70701X]
                                
 Investors in Poland were worried, however, by news that last
year's budget deficit may have exceeded 8 percent of gross
domestic product. [ID:nLDE70902N]
                                
 Czech inflation exceeded expectations but that did not faze
investors as analysts pointed out core inflation was still low.
[ID:nPRA005405]
                                
 Analysts expect the Czechs to follow Hungary and Poland in
raising rates some time in the middle of the year, although the
Czech central bank's latest quarterly forecast implies the
tightening cycle won't begin until the end of the year.
                                
 "A large part of the CNB (central bank) board will wish to
keep interest rates steady in the near term due to lasting
uncertainty about further development of the sovereign debt
crisis in the euro zone and its potential impact on the Czech
crown and economy," said Generali analyst Radomir Jac.
                                
 "We expect stable interest rates in Q1 2011 but we share the
view that the CNB will tighten its policy stance in Q2 2011."
                                
 Romania's leu <EURRON=> was flat as the IMF was expected to
approve a fresh release of funds on Friday. [ID:nWEN5256]
                                
 Romania's trade deficit <ROTBAL=ECI> narrowed in November as
export growth outstripped that of imports.
                                
 "A very good performance of exports will probably maintain
in the coming months," said Ionut Dumitru of Raiffeisen Bank in
Bucharest. "The trade balance, its evolution is sustainable."
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011 
Czech crown      <EURCZK=>  24.539    24.51   -0.12%   +1.88%
Polish zloty     <EURPLN=>   3.886    3.881   -0.13%   +1.85%
Hungarian forint <EURHUF=>  278.16   276.72   -0.52%   -0.06%
Croatian kuna    <EURHRK=>   7.398    7.374   -0.32%   -0.24%
Romanian leu     <EURRON=>   4.262    4.262    0%      -0.68%
Serbian dinar    <EURRSD=>  106.36   106.44   +0.08%   -0.41%
All data taken from Reuters at 0925 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.

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 (Reporting by Reuters bureaux, writing by Marton Dunai; Editing
by Ruth Pitchford)