CEE MARKETS 3-Leu hits 10-month high, forint extends gains

                                
 * Romania cbank adviser says fundamentals support leu
                                
 * Hungarian forint gains for fourth session in a row
                                
 * Poland Feb net inflation below expectations
                                
  
 (Adds leu move, Polish and Hungarian data, comment)
                                
 By Marcin Goettig and Sam Cage
                                
 WARSAW/BUCHAREST, March 22 (Reuters) - The Romanian leu hit
a 10-month high on Tuesday after the central bank said recent
gains reflected a stronger economy and the Hungarian forint
extended recent gains as prospects of rate cuts receded.
                                
 The leu <EURRON=> rose as high as 4.1265 per euro -- its
highest since May 4, 2010 -- after central bank adviser Luician
Croitoru said its level was in line with fundamentals and
analysts and dealers said it could gain further. [ID:nLDE72L18A]
                                
 The currency had lagged peers until recently as Romania
struggles to emerge from a deep recession, but slowly returning
growth and a new International Monetary Fund deal have put the
economy on a more solid footing.
                                
 "Romania looks better, fundamentals have been improving,"
said Ionut Dumitru of Raiffeisen Bank in Bucharest, who now sees
the leu reaching 4.15 per euro at the end of June, after
revising an early March prediction. <RO/POLL1>
                                
 The forint <EURHUF=> firmed for the fourth session in a row,
boosted after two new central bank rate setters appointed by the
ruling Fidesz party on Monday said they would fight inflation.
That made the prospect of the government seeking hasty rate cuts
less likely. [ID:nLDE72K0QV]
                                
 The government is exploring the impact of a potential
reduction in value-added tax on food, but it is not clear how
much consumers would benefit and no decision has been made,
Prime Minister Viktor Orban said. [ID:nLDE72L1G8]
                                
 Hungarian government bonds gave up almost all of their early
gains made as the forint had firmed. Yields rose by 4-5 basis
points in the afternoon, reversing 5-8 bp falls in the morning.
                                
 "The forint remains strong. The correction came I think as
people position for the (government bond) auctions (on Thursday
<HUISSUE>)," one Budapest-based fixed income trader said.

                                
 ZLOTY EDGES LOWER
                                
 Stock markets were mixed across the region after Monday's
gains, with Bucharest <.BETI> gaining 0.4 percent, Warsaw <.WIG>
slipping 1.0 percent and Prague <.PX> and Budapest <.BUX>
virtually flat.
                                
 The Polish zloty <EURPLN=> fell a touch after net inflation
was lower than market expectations, giving further support to
the view that the central bank will keep interest rates
unchanged at its April sitting. [ID:nLDE72L1IG]
                                
 Central bank Governor Marek Belka said markets may be
overestimating the scale of rate rises over the next 12 months.
The market is currently pricing in increases of 100 basis points
over the coming year. [ID:nLDE72L04Q]
                                
 "The words of Belka give no clear indication whether he will
support a rate hike in April," PKO BP analysts said in a note.
"At the same time we see them as a signal that a possible move
next month will not mean further fast hikes."
                                
 The Czech crown <EURCZK=> edged up 0.1 percent to 24.417 per
euro but is expected to meet resistance at its 55-day moving
average, now at 24.33, after falling below that level a week
ago. It is expected to remain broadly flat until an interest
rate meeting on Thursday.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011 
Czech crown      <EURCZK=>   24.417   24.452  +0.14%   +2.39%
Polish zloty     <EURPLN=>     4.03    4.026  -0.1%    -1.79%
Hungarian forint <EURHUF=>   270.17   271.03  +0.32%   +2.89%
Croatian kuna    <EURHRK=>    7.374    7.371  -0.04%   +0.08%
Romanian leu     <EURRON=>    4.125    4.154  +0.7%    +2.62%
Serbian dinar    <EURRSD=>   103.27   102.79  -0.46%   +2.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR     +7 basis points to  6bps over bmk*
7-yr T-bond   CZ7YT=RR     -2 basis points to  +64bps over bmk*
10-yr T-bond   CZ9YT=RR    -2 basis points to  +70bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR     +2 basis points to  +327bps over bmk*
5-yr T-bond   PL5YT=RR     -3 basis points to  +322bps over bmk*
10-yr T-bond PL10YT=RR     -1 basis points to  +302bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR     +4 basis points to  +479bps over bmk*
5-yr T-bond   HU5YT=RR     -4 basis points to  +458bps over bmk*
10-yr T-bond   HU10YT=RR   -3 basis points to  +402bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1549 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.

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 (Reporting by Reuters bureaus; Editing by Susan Fenton)