CEE MARKETS 3-Zloty, forint recover in wide swing after U.S data

                                
 * Zloty, forint recover sharp losses after U.S. data
                                
 * Crown less volatile, leu flat 
                                
 * Hungary bonds weaker, Polish bonds shrug off FX volatility
                                
 * CEE shows signs of turnaround, but risks remain
                                
 
  (Updates throughout)
                                
 By Gergely Szakacs and Marius Zaharia
                                
 BUDAPEST/BUCHAREST, Aug 7 (Reuters) - The Polish zloty and
the Hungarian forint recovered earlier losses on Friday, with
sharp gains after U.S. jobs data, while the leu was flat all day
as the Romanian industry showed a sign of turnaround.
                                
 The zloty and the forint were the main gainers of an
improvement in global sentiment last month, because of Poland's
better fundamentals and Hungary's higher yields, while the crown
and the leu were less volatile.
                                
 The Polish and Hungarian currencies also saw the largest
correction in the first half of the day on Friday, breaking
support levels when stock markets corrected amid a brief shift
in global sentiment.
                                
 The pace of Slovak and Romanian industrial output decline
slowed in June, data showed on Friday [ID:nL785663], and earlier
this week, the region saw improving Hungarian output figures as
well, while in Czech Republic, exports rose [ID:nL699067].
                                
 At 1332 GMT, the zloty <EURPLN=> was up 0.5 percent and the
<EURHUF=> was an inch down from the previous close after both
losing about 1 percent earlier in the day.
                                
 The crown <EURCZK=> firmed 0.5 percent, with most gains
coming after the U.S. data release, while the Romanian leu
<EURRON=> remained flat for most of the day.
                                
 "Data from the U.S. backed the Polish unit, but in a
short-term we see a room for a correction to around 4.22 to the
euro," said one Warsaw-based dealer.
                                
 Regional currencies often took cues from the euro/dollar
this year. But on Friday, they did not shift direction when the
greenback erased the losses in the aftermath of the jobs data as
traders said the U.S. currency is beginning to react positively
to supportive news [ID:nN07385606].
                                
 
                                
 RISKS STILL WEIGH
                                
 Financial pain in central Europe is still felt. The Czech
central bank surprised by unanimously cutting rates on Thursday
to 1.25 percent, highlighting the bank saw risks from external
price pressures and weakening domestic demand [ID:nL6221606].
                                
 On Friday, Romania's finance minister said the IMF accepted
an increase in the country's budget deficit to around 7 percent
of GDP as the economy is expected to contract by twice a
previous estimate [ID:nL7127335].
                                
 Poland is the only regional economy seen having a chance to
grow this year, which is why the zloty is seen by the markets as
best performing currency over a 12-month period [ID:nL5168081].
                                
 In rare comments on specific exchange rate levels, Czech
central bank governor Zdenek Tuma told local radio on Friday a
stronger crown exchange rate between 25 and 26 to the euro would
not be a big problem for the domestic economy. [ID:nL7731786]
                                
 Polish bonds were flat, shrugging off currency volatility,
while Hungarian bonds extended earlier losses.
                                
 "There has been profit-taking in the past days, the selling
side has been continuously stronger, but the market remains
liquid and bids are coming higher," one Budapest-based fixed
income trader said.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  25.78    25.91   +0.5%    +3.77%
Polish zloty     <EURPLN=>   4.113    4.134  +0.51%   +0.05%
Hungarian forint <EURHUF=> 269.8    269.16   -0.24%   -2.32%
Croatian kuna    <EURHRK=>   7.325    7.323  -0.03%   +0.55%
Romanian leu     <EURRON=>   4.21     4.207  -0.07%   -4.65%
Serbian dinar    <EURRSD=>  93.25    93.387  +0.15%   -4.04%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -23 basis points to  97bps over bmk*
4-yr T-bond   CZ4YT=RR   +7 basis points to  +118bps over bmk*
8-yr T-bond   CZ8YT=RR    0 basis points to  +243bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -9 basis points to  +333bps over bmk*
5-yr T-bond   PL5YT=RR    -8 basis points to  +277bps over bmk*
10-yr T-bond PL10YT=RR    -7 basis points to  +257bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -6 basis points to  +665bps over bmk*
5-yr T-bond   HU5YT=RR    -9 basis points to  +603bps over bmk*
10-yr T-bond   HU10YT=RR  -2 basis points to  +524bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1632 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus, writing by Gergely Szakacs
and Krisztina Than; editing by Andy Bruce)