CEE MARKETS-Forint scales 4-mth high, crown tests key level

                                
 * Forint firms through 270/EUR, strongest since Oct. 2010
                                
 * Investors turn increasingly hopeful about Hungary
                                
 * Crown testing break of 24, last seen in Nov. 2008
                                
 * C.Europe stock markets gain around 1 percent
                                
 
                                
 BUDAPEST, Feb 2 (Reuters) - Hungary's forint extended gains
versus the euro on Wednesday, breaking through the key 270 level
to scale fresh four-month highs, while the Czech crown, central
Europe's top performer this year, tested November 2008 highs.
                                
 The forint, second best behind the safe-haven crown with a
3.2 percent gain in 2011, has benefited from a cumulative 75
basis point increase in Hungarian interest rates over the past
three months and increasingly bullish expectations for fiscal
reforms.
                                
 Hungary's government is preparing a three-year fiscal
adjustment package worth around 600 billion-650 billion forints
($3.05 billion-$3.30 billion) to ensure a low budget deficit
beyond 2012 when temporary taxes worth 1.3 percent of GDP are
phased out.
                                
 Local media has reported the size of the adjustment could be
even greater [ID:nLDE71010T] and expectations for meaningful
reform have driven a fall in bond market yields and Hungarian
credit risk premia <0#HUGV5YUSAC=MG> over the past weeks.
                                
 "The forint could remain below 270 versus the euro if we
manage to close under that level," a Budapest-based currency
dealer said.
                                
 Central Europe's currencies have benefited from strength in
the euro <EUR=>, the region's reference currency, as well as
strong manufacturing data published on Tuesday, which indicated
economic recovery was accelerating.
                                
 Stock markets in the region also rose, with bourses in
Budapest, Prague, Warsaw and Bucharest each gaining around 1
percent by 0837 GMT as rising manufacturing activity bodes well
for corporate earnings although it also raises the likelihood of
further monetary tightening in the region.
                                
 "The expansion in the manufacturing sector is likely to
remain at this level during the first half of the year,"
Commerzbank said in a morning note.
                                
 "This could point towards a more rapid than expected rise in
inflation trends during the course of the year, which in turn
would require a tighter monetary policy," it said.
                                
 At 0821 GMT, the forint <EURHUF=> was 0.3 percent stronger
versus the euro at 269.45 and market participants said 268.70
would be the next key level, heading towards nine-month highs.
                                
 "I don't think that 268.70 would represent a very strong
resistance now," said Janos Samu, analyst at Concorde in
Budapest.
                                
 The Czech crown <EURCZK=> added 0.1 percent, hovering around
the key 24 level.
                                
 Dealers said levels around 23.700-23.800 would provide the
next major resistance -- the crown met resistance at those
levels when central European currencies started to retreat from
record highs at the end of 2008.
                                
 "I think people will start to look to buy (euros) around
23.900 to cover shorts," a Prague dealer said.
                                
 Dealers will also be eyeing comments after a meeting of the
Czech central bank on Thursday for clues on when it will start
to raise rates, the lowest in central Europe.
                                
 "The markets are seemingly pricing in somewhat of a hawkish
statement by the Czech central bank (CNB) following the
announcement," Danske Bank said in a note.
                                
 "Our own expectations are also on the hawkish side, as we
see the CNB moving closer to a rate hike and raising rates
possibly before year end -- indicated as the timing of a first
rate hike in the CNB's latest inflation report."
                                
 The Polish zloty <EURPLN=> gained 0.1 percent, while the
Romanian leu <EURRON=> was flat.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011
Czech crown      <EURCZK=>  24.043   24.037  -0.02%   +3.98%
Polish zloty     <EURPLN=>   3.893    3.899  +0.15%   +1.67%
Hungarian forint <EURHUF=> 269.45   270.3    +0.32%   +3.17%
Croatian kuna    <EURHRK=>   7.414    7.415  +0.01%   -0.46%
Romanian leu     <EURRON=>   4.255    4.256  +0.02%   -0.52%
Serbian dinar    <EURRSD=> 104.1    104.403  +0.29%   +1.76%
*Benchmark is German bond equivalent.
All data taken from Reuters at 0143 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
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(Reporting by Reuters bureaus; Writing by Gergely Szakacs;
Editing by Susan Fenton)