CEE MARKETS 3-FX weaker, cbank meetings, budgets eyed

                                
 * FX weaker, tracking stocks
* Region seen decoupling from dollar course
                                
 * Cbank meetings, budget problems eyed
                                
 
                                
 (Recasts with new comments, prices.)
                                
 By Sandor Peto and Marton Dunai
                                
 BUDAPEST, May 22 (Reuters) - East European currencies
weakened on Friday, continuing to ride on the waves of changing
views about the prospects of the global economy, which have also
put equity markets on a roller-coaster this week.
                                
 The outlook of the region's markets is blurred by domestic
factors like possible central bank interest rate cuts and a rise
in budget deficits as the global crisis continues to take its
toll on the region's economies, market participants said.
                                
 The Czech crown<EURCZK=> and the Polish zloty<EURPLN=> still
firmed about one percent and the Hungarian forint<EURHUF=> two
percent over the week which started with renewed optimism over
the world economy and increased appetite for risk.
                                
 But as the global mood remains fragile, the currencies of
the European Union's emerging markets change direction quickly.
                                
 Tracking equity markets on Friday, they fell in the morning,
rebounded later and fell again after U.S. equity markets opened.
                                
 The forint eased 0.7 percent from Thursday, the crown and
the Romanian leu<EURRON=> 0.1 percent and the zloty 0.4 percent.
                                
 "It's visible that the forint and the region's currencies
track stock markets," one Budapest-based dealer said. "Up and
down movements will continue, I can't foresee anything which
would make (global and regional) markets calm down."
                                
 While global markets continue to consider the likely length
of the crisis, Central European economies are struggling with
the impacts of the crisis -- economic slowdown or deep
recession, and falling state revenues.
                                
 Polish president Lech Kaczynsky called for a far-reaching
budget revision on Friday[ID:NLM657948]. Earlier this week the
International Monetary Fund and the European Union allowed
Hungary to raise its deficit targets for this year and next.
                                
 "Possible budget troubles definitely have the potential to
move people's imagination," said one Warsaw-based fixed-income
dealer.
                                
 
                                
 CENTRAL BANKS IN FOCUS
                                
 Investors also mull whether the region's central banks cut
their interest rate further to help the economy. Lower rates
could weigh on currencies but help government bonds.
                                
 Hungarian bonds firmed, with yields dropping by about 10
basis points. The rate-setting panel of the country's central
bank will meet on Monday and is expected to keep interest rates
on hold but cut them later this year.[ID:nLK328075]
                                
 "Comments after Monday's rate meeting may herald a rate cut
in the next one or two months, that's why bonds firmed," one
Budapest-based fixed income trader said.
                                
 The Polish central bank is also expected to keep rates
unchanged at its meeting next week.[ID:nLM425812]
                                
 An earlier link of the region's currencies with the euro's
strength against the dollar was replaced this week with a
correlation with stock markets, analysts and dealers said.
                                
 "It would ... be wrong to assume that the current rise in
EUR-USD towards 1.40 means that EMEA currencies are likely to
trend stronger. We advise to look more towards stock markets and
thus risk aversion," Commerzbank said in a daily note.
 ----------------------MARKET SNAPSHOT-------------------------
 Currency                    Latest   Previous Local    Local
                                
                                   close    currency currency
                                
                                            change   change
                                
                                            today    in 2009 
 Czech crown      <EURCZK=>   26.682    26.645  -0.14%   +0.27%
 Polish zloty     <EURPLN=>   4.402    4.385    -0.39%    -6.52%
 Hungarian forint <EURHUF=>   280.03    278     -0.72%    -5.89%
 Croatian kuna    <EURHRK=>   7.316    7.436    +1.64%   +0.67%
 Romanian leu     <EURRON=>   4.175    4.17    -0.12%    -3.85%
 Serbian dinar    <EURRSD=>   94.557    94.56   0%    -5.37%
                                
 Yield Spreads
 Czech treasury bonds <0#CZBMK=>
 2-yr T-bond   CZ2YT=RR   +4 basis points to  160bps over bmk*
 4-yr T-bond   CZ4YT=RR   +13 basis points to  +196bps over bmk*
 8-yr T-bond   CZ8YT=RR   +14 basis points to  +275bps over bmk*
 Polish treasury bonds <0#PLBMK=>
 2-yr T-bond   PL2YT=RR   +1 basis points to  +431bps over bmk*
 5-yr T-bond   PL5YT=RR    -3 basis points to  +332bps over bmk*
 10-yr T-bond PL10YT=RR    -6 basis points to  +280bps over bmk*
 
 Hungarian treasury bonds <0#HUBMK=>
 3-yr T-bond  HU3YT=RR    -24 basis points to  +839bps over bmk*
 5-yr T-bond  HU5YT=RR    -61 basis points to  +771bps over bmk*
 10-yr T-bond HU10YT=RR  -52 basis points to  +637bps over bmk*
 *Benchmark is German bond equivalent.
 All data taken from Reuters at 1552 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
 
 (Reporting by Marton Dunai; editing by Stephen Nisbet/Victoria
Main)