CEE MARKETS 1-Zloty, forint end 2009 strong as dollar struggles

                                
 * Dollar weakness helps end 2009 on strong note
                                
 * Timid recovery likely to hold in opening weeks of 2010
                                
 * Politics still a wild card for emerging Europe
                                
 
                                
 By Jason Hovet
                                
 PRAGUE, Dec 31 (Reuters) - The Polish zloty and Hungarian
forint gained on Thursday as dollar weakness helped riskier
emerging European assets end 2009 on a stronger note likely to
last into the new year.
                                
 The zloty rise pushed it to a slight gain over levels from a
year ago as an emerging market rally in the second half of 2009
erased the sharp losses central Europe's financial markets
suffered to start the year.
                                
 Central European stock markets, mostly closed on Thursday
for the new year holiday, posted more than 30 percent gains in
2009, while bond yields across the region fell from 2009 highs
by several percentage points.
                                
 Currencies have also rebounded with double digit growth
since February and March lows, led by a 20 percent rise for the
zloty.
                                
 But the market recovery has mostly stagnated in the final
months due to concerns over still timid growth rates and
mounting budget deficits in central Europe, although strategists
have said investors' appetite for emerging market assets will
keep the region on stronger ground to start 2010.
 "We could start next year with a weaker dollar and emerging
markets will perform better on that sentiment," a London-based
dealer said. "How long it will last is still a good question."
                                
 The zloty <EURPLN=> rose 0.4 percent to bid at 4.11 to the
euro by 1036 GMT, bringing it to a 0.1 percent rise over its
closing level a year ago. 
                                
 The currency has been tipped as a 2010 outperformer due to
expectations that Poland's economy, the only in the region to
avoid recession, will outpace peers next year with growth of
more than 2 percent. [ID:nGEE5B229H] [ID:nLDE5BR0MH]
 Dealers have noted rising interest in the long zloty to
short Czech crown intra-region trade after the Czech central
bank cut interest rates to a record low of 1 percent this month.
                                
 The crown <EURCZK=> dipped to 26.43 per euro on Thursday
although it has gained 1.2 percent this year to lead the region,
helped by its safer haven status due to sounder economic
fundamentals and low debt.
                                
 
                                
 STILL ISSUES
                                
 Hungary's forint <EURHUF=> added 0.6 percent in the final
session of the year, but has lost 3 percent this year, while
Romania's leu <EURRON=> was steady, down 5 percent on the year.
                                
 Hungary and Romania have both relied on International
Monetary Fund aid packages to fill in financing gaps this year.
The latter's deal was put on hold due to a political impasse,
which ended with presidential elections this month that ushered
in a new government. [ID:nLDE5BS0LK]
                                
 That reflects concerns over the political environment across
the region at a time when governments are having to take
unpopular fiscal steps to keep finances under control.
[ID:nGEE5B70YK] [ID:nGEE5B70ZL]
                                
 "People will be cautious on putting too much money into the
region (compared to other emerging markets)," said David Sykora,
a dealer with CSOB bank in Prague. 
                                
 "The whole region is still facing the issue (of politics),
and people don't like putting money into something
unpredictable." 
                                
 Dealers expect the leu to firm early next year after
parliament approves an austere 2010 budget, key to getting the
IMF to free up funds from the 20 billion euro aid package.
                                
 The IMF's Europe head told Reuters on Wednesday he expected
no problems with the payment of a third tranche to Romania.
in Poland. 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.437   26.41   -0.1%    +1.2%
Polish zloty     <EURPLN=>    4.112    4.13   +0.44%   +0.07%
Hungarian forint <EURHUF=>  270.77   272.44   +0.62%   -2.67%
Croatian kuna    <EURHRK=>    7.286    7.292  +0.08%   +1.08%
Romanian leu     <EURRON=>    4.23     4.236  +0.14%   -5.1%
Serbian dinar    <EURRSD=>   95.91    96.25   +0.35%   -6.7%
All data taken from Reuters at 1137 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.

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 (Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham)