CEE MARKETS 1-Leu sheds overnight gains, zloty stabilises

                                
 * Leu had risen overnight after govt survived vote
                                
 * Leu struggles at 4.26, more fiscal reforms seen needed
                                
 * Zloty stabilises after losses on cbank rate decision
                                
 
                                
 By Marius Zaharia
                                
 BUCHAREST, Oct 28 (Reuters) - Romania's leu on Thursday lost
the bulk of overnight gains posted following a failed attempt to
topple the government, as markets turned their attention back to
a review of the country's fiscal reform programme by the IMF.
                                
 In Poland, the zloty stabilised after losses in the previous
session triggered by the central bank's decision to keep
borrowing costs unchanged, disappointing some players who had
anticipated a hike in its main interest rate. [ID:nLDE69P19B]
                                
 As widely expected, Romania's ten-month-old centrist
government survived a no-confidence vote late on Wednesday over
fiscal tightening moves needed to keep funds from an
International Monetary Fund-led bailout flowing into central
Europe's laggard economy.
                                
 The Fund is in Bucharest until Nov. 1 to review Romania's
progress with its reforms, and markets expect new fiscal
challenges ahead for the fragile coalition government, keeping
political risk factors prominent.
                                
 The leu <EURRON=> gained about half a percent from
Wednesday's close overnight but failed break through 4.26, its
200-day moving average against the euro. By 0736 GMT, leu bids
backed off a two-week high of 4.259 to trade at 4.266, up 0.1
percent on the day.
                                
 "The decision was likely just a temporary breather for the
government," Barclays Capital said in a note.
                                
 "The continued fiscal adjustment requires extending wage and
social transfer cuts into 2011, while elections are approaching
in 2012 ... The focus will be on the ongoing IMF mission."
                                
 Hungary's forint <EURHUF=>, the Czech crown <EURCZK=> and
the zloty <EURPLN=> were flat or a touch weaker.
                                
 Poland's central bank did move on Wednesday to tighten
liquidity in its banking sector, however, raising the minimum
reserve requirement for banks. Governor Marek Belka said this
move was "a small signal" of tighter rates ahead.
                                
 "The market reaction (on Wednesday) showed that a rate hike
had already been anticipated," Commerzbank said in a note. "The
appreciation potential of the zloty is therefore limited."
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>  24.635   24.632   -0.01%   +6.83%
Polish zloty     <EURPLN=>   3.961    3.962   +0.03%   +3.61%
Hungarian forint <EURHUF=> 275.36   275.1     -0.09%   -1.82%
Croatian kuna    <EURHRK=>   7.343    7.342   -0.01%   -0.46%
Romanian leu     <EURRON=>   4.266    4.272   +0.14%   -0.67%
Serbian dinar    <EURRSD=> 107.78   107.05    -0.68%  -11.04%
All data taken from Reuters at 0836 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
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 (Reporting by Marius Zaharia; Editing by John Stonestreet)