CEE MARKETS 2-Currencies extend gains, led by zloty

                                
 * East Europe FX gains on improved global sentiment
                                
 * Czech output drops more than expected in March
                                
 * Polish cbanker says rates should stay on hold until June
                                
 
                                
 By Krisztina Than
                                
 BUDAPEST, April 30 (Reuters) - Emerging European currencies
extended gains on Thursday, led by the Polish zloty, and dealers
said a rise in U.S. stocks overnight showed improved sentiment
that would support the region's currencies.
                                
 "I think the forint will slowly head towards the level of
285 (per euro) as U.S. stocks performed well yesterday and ...
the yen weakened ... overnight which could help," a
Budapest-based currency dealer said.
                                
"The market is bullish right now, for the moment it is not
turning back," said a dealer in Bucharest.
                                
 Stocks in the U.S. and Asia jumped as investors took heart
from some signs of improvement in the U.S. economy.
                                
 The Federal Reserve said the economic outlook had improved a
bit in recent weeks but also said that low interest rates would
be needed for some time.
                                
 Eastern Europe's currencies gained on Wednesday led by the
Polish zloty, which got a boost from lower forecasts for the
scale of Polish companies' exposure to soured currency options.
                                
 Poland's central bank kept the key rate on hold at 3.75
percent on Wednesday, but many analysts said the bank was still
likely to ease borrowing costs further. [ID:nLT440545]
                                
 A Polish rate setter said on Thursday rates should remain on
hold until June when the Monetary Council will receive a new
inflation projection. [ID:nLU7971]
                                
 By 0850 GMT, the zloty <EURPLN=> rose 0.78 percent from the
domestic close, the Hungarian forint <EURHUF=> gained 0.43
percent, while the Czech crown <EURCZK=> rose 0.4 percent and
the Romanian leu <EURRON=> was practically flat.
                                
 Data showed on Thursday that Czech industrial output plunged
by a worse-than-expected 17.5 percent year-on-year in March,
after a 23.4 percent fall in February, the Czech Statistical
Bureau (CSU) said in a flash estimate.[ID:nLU337355]
                                
 A collapse of demand in key export markets, primarily in
Germany, hits eastern Europe's most export-led economies -- such
as the Czech and Hungarian economy -- and visible in Hungarian
trade data on Thursday which showed a 30 percent annual drop in
exports in February, and a similar import fall.
                                
 Local bond markets benefited from stronger currencies.
                                
 "The regional sentiment is positive ... so yields dropped
around 5-7 basis points," a Hungarian fixed income trader said.
                                
 Poland's planned debt supply [ID:nWAR008251] was also seen
as a positive for the market, traders said.
                                
 "The finance ministry's bond supply could be seen as a
positive surprise because we could have expected more debt on
offer. So it seems the ministry will have no problems placing
those papers, there should be sufficient demand," said Krzysztof
Izebski, FI dealer at PKO Bank.
                                
 "But market reaction was muted because trade volumes are low
due to the already spreading long weekend atmosphere," he said.
 ----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.653    26.753  +0.38%   +0.38%
Polish zloty     <EURPLN=>   4.382    4.416    +0.78%    -6.09%
Hungarian forint <EURHUF=>   288    289.25     +0.43%    -8.49%
Croatian kuna    <EURHRK=>   7.41    7.408     -0.03%    -0.61%
Romanian leu     <EURRON=>   4.176    4.173    -0.07%    -3.87%
Serbian dinar    <EURRSD=>   94.72    94.875   +0.16%    -5.53%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -3 basis points to  179bps over bmk*
4-yr T-bond   CZ4YT=RR    -4 basis points to  +204bps over bmk*
8-yr T-bond   CZ8YT=RR    -8 basis points to  +296bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -8 basis points to  +415bps over bmk*
5-yr T-bond   PL5YT=RR    -8 basis points to  +340bps over bmk*
10-yr T-bond PL10YT=RR    -10 basis points to +297bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -32 basis points to  +864bps over bmk*
5-yr T-bond   HU5YT=RR    -66 basis points to  +802bps over bmk*
10-yr T-bond   HU10YT=RR  -56 basis points to  +704bps over bmk*
*Benchmark is German bond equivalent.
                                
 All data taken from Reuters at 1043 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
 (Reporting by Krisztina Than; Editing by Andy Bruce)