CEE MARKETS 3-FX cut losses, led by crown; investors stay wary

                                
 (Recasts to update prices)
                                
 PRAGUE, Feb 9 (Reuters) - The Czech crown jumped on Monday
along with the Polish zloty, and central Europe's currencies cut
earlier losses as investors returned to riskier assets, but
analysts and dealers said pressure will likely remain.
                                
 Stocks reversed to trim losses, along with some western
peers, although investors showed caution pending the approval in
the United States of a massive stimulus plan. [ID:nL9585864]
                                
 The crown <EURCZK=> led gains, rising 0.7 percent over
Friday's domestic close to bid at 27.84 per euro by 1108 GMT.
                                
 Dealers said there was more room to rise after the central
bank last week unveiled an FX forecast showing much stronger
local currency levels than today. [ID: nPRA002355]
                                
 "The euro/crown has more potential for a deeper correction,"
a Prague trader said, adding a support level will be hit at 27.4
per euro. "Investors are starting to look at riskier assets."
                                
 The zloty <EURPLN=> added 0.55 percent to 4.52 to the euro.
                                
 Currencies have been hit hard in 2009 by risk aversion, and
economic outlooks point to a sharp slowdown this year due to
slumping demand from a recession-hit euro zone.
                                
 Rate setters have loosened monetary policy in response,
while currencies' sharp reversal from all-time highs seen last
summer has left many exporters overhedged.
                                
 The Hungarian forint <EURHUF=> fell 0.3 percent to 289.6 per
euro, and the Romanian leu <EURRON=> dipped to 4.24.
                                
 The Hungarian and Swiss national banks announced last month
a new euro-Swiss franc swap agreement to Hungary's banks with
funding in francs, popular for mortgages due to lower Swiss
interest rates. [ID:nLS200587]
                                
 "We have the (central bank's) EUR/CHF tender later today,
and it will be interesting to see how much the bank allocates,"
a local trader said.
                                
 In the Czech Republic, data showed inflation decelerated
further in January to 2.2 percent, below the bank's mid-point
target. [ID:nL9192673]
                                
 Other data showed the Czech jobless rate jumped by almost a
percentage point in January, and Slovakia's industry showed its
worst contraction in a decade.
                                
 The Czech central bank cut interest rates to a historic low
on Thursday, but signalled rates may be near bottom, although
analysts said there was still room to cut.
                                
 Romania's central bank governor said on Friday monetary
policy will remain tight until fiscal and wage discipline is
enforced. [ID:nL6708438]
                                
 The zloty has lost almost 29 percent since the end of July,
while the forint is down 19 percent in that time. The crown has
fallen 14 percent and the leu 17 percent.
                                
 Last week, analysts said in a Reuters poll it would likely
get worse for the region's currencies before it gets better.
[ID:nL5155423]
                                
 Investors were bracing for a slew of fresh data this week
from central Europe's fast slowing economies, including GDP data
in Hungary and the Czech Republic.
                                
 "The surprise potential is rather limited," said Ulrich
Leuchtmann, head of foreign exchange research at Commerzbank in
Frankfurt. "Everybody knows we are heading for a rather steep
economic slowdown."
                                
 
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   27.835   28.042  +0.74%    -3.89%
Polish zloty     <EURPLN=>    4.523    4.548  +0.55%    -9.02%
Hungarian forint <EURHUF=>  289.62   288.65   -0.33%    -9%
Croatian kuna    <EURHRK=>    7.43     7.406  -0.32%    -0.87%
Romanian leu     <EURRON=>    4.241    4.238  -0.07%    -5.34%
Serbian dinar    <EURRSD=>   92.22    92.14   -0.09%    -2.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -42 basis points to  145bps over bmk*
4-yr T-bond   CZ4YT=RR    -3 basis points to  +110bps over bmk*
8-yr T-bond   CZ8YT=RR    -3 basis points to  +221bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -4 basis points to  +968bps over bmk*
5-yr T-bond   HU5YT=RR    -3 basis points to  +924bps over bmk*
10-yr T-bond   HU10YT=RR  -4 basis points to  +725bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1210 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; Editing
by Ruth Pitchford)