CEE MARKETS 2-Zloty, Forint fall, markets eye rate outlook

                                
 * Forint, zloty fall
                                
 * Hungary bonds ease, mulling cbank rates
                                
 * Crown withstands pressure
                                
 
  (Adds bonds, comments, background)
                                
 BUDAPEST, Aug 17 (Reuters) - Central Europe's currencies and
bonds eased on Monday as a bout of risk aversion hit emerging
markets, while investors in Hungary awaited a long weekend and 
subsequent central bank (NBH) interest rate decision.
                                
 Data from the region were mixed last week with the economies
of Hungary and Romania showing deep contractions in the second
quarter, while Poland's economy grew around 0.5 percent and the
Czech economy pulled out of recession. [ID:nLD517467]
                                
 Poland's zloty <EURPLN=> shed a full percent to trade at
4.19 versus the euro at 0839 GMT.
                                
 Hungary's forint <EURHUF=>, seen as one of the more
vulnerable currencies this week because of poor liquidity before
a four-day holiday weekend, fell 0.7 percent to 273.50.
                                
 Hungarian government bonds, which often track the forint,
fell, with yields rising mainly at the short end and the middle
of the curve. The yield on three-year benchmark bonds rose by 15
basis points to 8.5 percent.
                                
 "Equities closed weaker on Friday and the forint has
weakened," one Budapest-based bond trader said.
                                
 "The market is in a waiting mode, mulling what the (NBH)
interest rate decision will be... If they surprise by not
cutting rates, short- and middle-segment yields can rise."
                                
 The NBH is due to make an interest rate decision on Aug 24.
It cut rates by a bigger-than-expected 100 basis points last
month and has signalled further significant easing for the rest
of the year to help the economy fight deep recession.
                                
 Polish bonds also eased as the weakness of the zloty and
risk appetite pushed yields up by 2-3 basis points, even though
the Polish economy has avoided recession and the central bank is
not expected to cut rates further in the next months.
                                
 
                                
 CROWN, LEU STEADY
                                
 But the Czech crown <EURCZK=> was steady, despite a
government announcement over the weekend that the budget gap may
surge next year, as it is currently seen as a funding currency,
dealers added. [ID:nLH362641]
                                
 "Generally the crown faces lower volatility because some
investors are using the crown as a financing currency," said Jan
Cermak, an FX analyst with CSOB. "So when there is a correction
and risk aversion goes up, then these carry trades help the
crown's stability."
                                
 The forint was seen weakening further but the 275/275.60
level was seen as a strong support level, dealers added.
                                
 "Given the bigger gains earlier, I still think this is a
natural correction," one dealer said. "For now, this is all
regional and when the euro slides versus the dollar, the forint
weakens and vice versa."
                                
 He added that continued interest rate cut expectations also
affected the Hungarian currency and could shake up trade before
next Monday's rate decision. Local markets will be closed on
Thursday and Friday.
                                
 "Rate decisions depend right now on the forint's strength
and two days with no local banks on the market could be an
opportunity for some players to try to move the currency and
scare the central bank," he said.
                                
 Analysts added that the zloty was moving on global
sentiment. Wall Street was sent reeling on Friday by data
showing U.S. consumer confidence fell more than expected in
early August, dropping to its lowest level since March. [.N]
                                
 "Taking into account that there are no data releases,
neither in Poland nor on the core markets, the global sentiment
will be key," BPH Bank analysts wrote in a note to clients.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009
Czech crown      <EURCZK=>  25.758   25.765   +0.03%    +3.86%
Polish zloty     <EURPLN=>    4.19    4.146   -1.05%    -1.79%
Hungarian forint <EURHUF=>   273.5    271.7   -0.66%    -3.64%
Croatian kuna    <EURHRK=>   7.304    7.311    +0.1%    +0.84%
Romanian leu     <EURRON=>   4.218    4.218       0%    -4.83%
Serbian dinar    <EURRSD=>   93.15    93.44   +0.31%    -3.94%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +39 basis points to  106bps over bmk*
4-yr T-bond   CZ4YT=RR   +2 basis points to  +133bps over bmk*
8-yr T-bond   CZ8YT=RR   +12 basis points to  +263bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -1 basis points to  +365bps over bmk*
5-yr T-bond   PL5YT=RR   +1 basis points to  +316bps over bmk*
10-yr T-bond PL10YT=RR   +1 basis points to  +285bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -25 basis points to  +693bps over bmk*
5-yr T-bond   HU5YT=RR    -57 basis points to  +626bps over bmk*
10-yr T-bond   HU10YT=RR  -45 basis points to  +538bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1039 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Balazs Koranyi,
editing by Lin Noueihed)