CEE MARKETS 2-FX shed early gains, Romania cuts rates

                                
 * FX trims early gains after euro slips
                                
 * Romania's c.bank surprisingly cuts rates to 7.5 pct
                                
 
 (Adds fixed income, detail)
                                
 By Dagmara Leszkowicz
                                
 WARSAW, Jan 5 (Reuters) - Emerging Europe's currencies
trimmed morning gains on Tuesday after the dollar recouped its
losses against the euro but underlying sentiment remains firm
following a rash of improved macroeconomic data.
                                
 Romania's central bank unexpectedly cut its benchmark
interest rate by 50 basis points to 7.5 percent, though the
immediate impact on the leu <EURRON=> was limited. It traded up
0.1 percent versus the euro after the news, off early highs.
                                
 Most analysts had expected the Romanian bank to hold fire on
rates until February, after the expected parliamentary approval
of a 2010 budget bill this month which is key to securing the
next tranche in its IMF-led aid package.
                                
 Elsewhere, the zloty <EURPLN=> was 0.2 percent down against
the euro by 1045 GMT, but is still almost 2 percent above its
level this time last year and more than 17 percent above an
all-time low reached in mid-February 2009.
                                
 "It is still a core market story," said one Budapest-based
dealer, referring to improved sentiment in key global markets in
the United States and Europe. "They are happy, we are happy."
                                
 In Poland, analysts said the market was waiting for fresh
data to give a sense of how firm the economic recovery is.
                                
 "The zloty is close to 12-month highs against the euro, but
there's no impetus for it to firm beyond current levels," said
Lukasz Wojtkowiak, FX strategist at Millennium bank in Warsaw. 
                                
 Hungary's forint <EURHUF=> fell some 0.3 percent against the
euro in late morning trade while the Czech crown <EURCZK=> was
almost unchanged.
                                
 Analysts said news that the Czech state budget deficit was
almost five times higher than the original plan in 2009 was
still weighing on the crown.
                                
 
                                
 DEFICIT RISK
                                
 Budget deficits remain a key risk in the region as it
grapples with the impact of the global economic crisis and
investors are closely watching the countries' fiscal
performance, especially as some face elections this year.
                                
 In Hungary, where an IMF-led emergency aid has imposed tough
fiscal conditions, the 2009 budget deficit is likely to come in
below the cabinet's target after tax revenues in December beat
expectations while spending remained under control.
[ID:nLDE6030NB]
                                
 Poland also expects its 2009 budget deficit to come in below
a revised target of 27 billion zlotys but this could double in
2010. The overall budget gap could hit 7 percent of GDP.
                                
 Poland's finance ministry on Monday gave details of the debt
supply for the first quarter. Dealers said the amounts were in
line with market expectations after the economic slowdown hit
 state coffers. [ID:nLDE6031EM]
                                
 Polish bonds were slightly weaker after the news but
reversed their losses on Tuesday, with yields falling across the
curve by some 2 basis points.
                                
 Hungarian papers also firmed in a trend local dealers
attributed to the improved global sentiment.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  26.24    26.231   -0.03%   +0.3%
Polish zloty     <EURPLN=>   4.092    4.082   -0.24%   +0.29%
Hungarian forint <EURHUF=> 269.13   268.35    -0.29%   +0.45%
Croatian kuna    <EURHRK=>   7.288    7.291   +0.04%   +0.29%
Romanian leu     <EURRON=>   4.206    4.214   +0.19%   +0.75%
Serbian dinar    <EURRSD=>  96.41    96.43    +0.02%   -0.55%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR    -21 basis points to  82bps over bmk*
7-yr T-bond   CZ7YT=RR    -4 basis points to  +75bps over bmk*
10-yr T-bond   CZ10YT=RR   +1 basis points to  +64bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +2 basis points to  +381bps over bmk*
5-yr T-bond   PL5YT=RR    -1 basis points to  +350bps over bmk*
10-yr T-bond PL10YT=RR    -1 basis points to  +284bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    0 basis points to  +563bps over bmk*
5-yr T-bond   HU5YT=RR    -1 basis points to  +503bps over bmk*
10-yr T-bond   HU10YT=RR  -1 basis points to  +437bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1045 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus; writing by Dagmara Leszkowicz;
editing by Patrick Graham)