CEE MARKETS 2-FX regain ground, lifted by equity gains

                                
 * Forint gains ground, shakes off widening C/A
                                
 * Stock gains support FX
                                
 * Romania expected to hold rates, leu up
                                
 
 (Adds details, fixed income)
                                
 By Jason Hovet
                                
 PRAGUE, March 31 (Reuters) - Hungary's forint edged higher
on Tuesday, regaining some footing after sharp falls the
previous session as rising stocks lifted emerging European
currencies.
The forint led peers sharply lower on Monday after Standard
& Poor's cut Hungary's credit rating to one level above junk.
Markets also gave a cool reception to Hungary's new choice of a
prime minister as investors shunned risk due to worries over the
U.S. auto sector. [ID:nLU642921]
                                
 The forint <EURHUF=> rose 0.4 percent to bid at 309.05 per
euro at 0835 GMT, just off lows it traded at on Monday and
shrugged off a widening current account gap in the fourth
quarter. [ID:nLV665143]
                                
 Romania's leu <EURRON=> was steady at 4.22 per euro while
markets waited for the end of a central bank meeting where rates
were seen being kept on hold to keep pressure off the currency.
                                
 Dealers said the end of the quarter was likely to bring some
short relief to battered central European currencies that have
fallen sharply on worries over growth, financing and banks, with
losses of 14.7 percent already for the forint this year.
                                
 "Risk aversion is back a bit," said a central European
currency trader in Stockholm. "(But) we have to keep an eye on
equity markets; sentiment is not as bad as yesterday."
                                
 
                                
 STOCKS REBOUND
                                
 Stocks in central Europe rose around 2 percent, helping
currencies gain, with Poland's zloty up 1 percent at 4.689 per
euro and the Czech crown gaining 0.5 percent to 27.485.
                                
 Shares in FHB bank <FHBK.BU> were suspended after Hungary's
government said on Tuesday it would give it a $128 million
capital increase, while raising its stake to 43.5 percent from
4.1 percent. [ID:nLV221892]
                                
 Politics also hung over the region as markets watched for
developments in the formation of a new government in the Czech
Republic, after a no-confidence vote last week. [ID:nLO231401]
                                
 In Hungary, prime minister designate Gordon Bajnai, who is
set to replace outgoing leader Ferenc Gyurcsany in April, plans
to cut spending by 200 billion forints ($855.4 million) this
year, local media reported. [ID:nLV180851]
                                
 Hungarian bonds stayed quiet after S&P's downgrade on
Monday. "This is anything but a bull market," a local dealer
said. "Everyone set levels that will never materialise. We're
waiting, just waiting, which does the market no good."
                                
 Romania, which had its credit ratings downgraded to below
investment grade, last week followed Hungary in securing a 20
billion euro IMF-led aid package that was accompanied by a
pledge from foreign banks to keep their exposure there.
                                
 On Monday, Fitch ratings warned the ongoing global financial
crisis exposed Romanian banks to increased risk. [ID:nWNA0376]
                                
 
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   27.485   27.613  +0.47%    -2.66%
Polish zloty     <EURPLN=>    4.689    4.737  +1.02%   -12.24%
Hungarian forint <EURHUF=>  309.05   310.29   +0.4%    -14.72%
Croatian kuna    <EURHRK=>    7.479    7.482  +0.04%    -1.52%
Romanian leu     <EURRON=>    4.222    4.222   0%       -4.92%
Serbian dinar    <EURRSD=>   94.748   94.588  -0.17%    -5.56%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -2 basis points to  240bps over bmk*
4-yr T-bond   CZ4YT=RR    -22 basis points to  +258bps over bmk*
8-yr T-bond   CZ8YT=RR    -58 basis points to  +319bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   -53 basis points to  +1137bps over bmk*
5-yr T-bond   HU5YT=RR    +1 basis points to  +1063bps over bmk*
10-yr T-bond   HU10YT=RR +12 basis points to  +927bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1037 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus, writing by Jason Hovet)