CEE MARKETS 2-Forint leads CEE FX rebound ahead of cbank mtg

                                
 * Euro gain helps CEE fx rebound after Thursday fall
                                
 * Forint firmer ahead of cbank meeting, gain seen limited
                                
 * Equities rise, govt bonds weaken
                                
 
 (Recasts with comments, updates prices)
                                
 BUDAPEST, Jan 21 (Reuters) - The Hungarian forint led gains
in emerging European currencies on Friday, recouping some of
Thursday's losses on rising expectations the central bank will
raise interest rates again on Monday.
                                
 The region's currencies and equities also benefitted from
gains in euro zone assets and the euro <EUR=>, helped by a
strong Ifo report on business sentiment in Germany, central
Europe's key export market.
                                
 Rising inflation pressure in the region has already
triggered interest rate hikes.
                                
 Poland's central bank lifted its key rate by 25 basis points
to 3.75 percent on Wednesday and Hungary's central bank, the
first in the region to start tightening late last year, is
expected to follow with a quarter percentage point increase in
its base rate to 6 percent on Monday. <HUREPO1>[ID:nLDE70J004]
                                
 Hungary's currency and bond markets have been volatile ahead
of the meeting.
                                
 The forint <EURHUF=> firmed half a percent against the euro
to 274.55 by 1133 GMT, after shedding more than 1 percent on
Thursday when it fell in tandem with the Polish zloty in late
trade.
                                
 "The forint opened stronger, even before the Ifo index came
out," one Budapest-based dealer said. "Levels at 271 before
yesterday's fall were too strong, perhaps somebody wanted to
knock out some trade levels then."
                                
 Dealers said another rise in Hungarian interest rates on
Monday would have no impact on the currency as it has been
priced in, while any firming until the rate meeting could be
limited.
                                
 "I think investors will keep the forint from getting too
strong lest the central bank change its mind and hold rates on
Monday," a Budapest-based dealer said.
                                
 Hungary's central bank raised its key base rate twice by a
total of 50 basis points to 5.75 percent late last year.<NBHI>
                                
 Hungarian government bond yields rose by around 5 basis
points, giving up some ground after a rally which cut yields
earlier this week to eight-week lows.
                                
 Hungary and Poland are expected to keep raising rates and
investors are also waiting for both governments to unveil
sustainable budget reforms to ensure their budget deficits do
not swell once one-off measures expire. [ID:nLDE70J1H3]
                                
 The Polish zloty <EURPLN=> also rebounded on Friday, firming
0.3 percent to 3.887. The Czech crown <EURCZK=> gained 0.4
percent to 24.284, while the Romanian leu <EURRON=> firmed 0.1
percent to 4.263.
                                
 While the forint was seen staying in the 273-277 range in
the short term, dealers said the crown could strengthen further.
                                
 "It is being driven by euro/dollar and we expect we could
look somewhere near (EUR/CZK) 24.00," said a dealer in Prague.
 --------------------------MARKET SNAPSHOT--------------------
 Currency                    Latest   Previous Local    Local
                                
                                   close    currency currency
                                
                                            change   change
                                
                                            today    in 2011 
 Czech crown      <EURCZK=>   24.284    24.374  +0.37%   +2.95%
 Polish zloty     <EURPLN=>   3.887    3.897  +0.26%   +1.83%
 Hungarian forint <EURHUF=>   274.57    275.95  +0.5%   +1.24%
 Croatian kuna    <EURHRK=>   7.39    7.391  +0.01%    -0.14%
 Romanian leu     <EURRON=>   4.263    4.269  +0.14%    -0.7%
 Serbian dinar    <EURRSD=>   104.52    104.82  +0.29%   +1.35%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -1 basis points to  52bps over bmk*
7-yr T-bond   CZ7YT=RR    0 basis points to  +76bps over bmk*
10-yr T-bond   CZ9YT=RR    0 basis points to  +85bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +4 basis points to  +371bps over bmk*
5-yr T-bond   PL5YT=RR   +2 basis points to  +346bps over bmk*
10-yr T-bond PL10YT=RR   +2 basis points to  +318bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +2 basis points to  +549bps over bmk*
5-yr T-bond   HU5YT=RR   +6 basis points to  +520bps over bmk*
10-yr T-bond   HU10YT=RR +5 basis points to  +448bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1152 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news [EMRG]
Spot FX rates
Eastern Europe spot FX <EEFX=>    Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=>       Latin America spot FX <LATAMFX=>
Other news and reports  
World central bank news [CEN]  Economic Data Guide <ECONGUIDE> 
Official rates [GLOBAL/INT]  Emerging Diary [EMRG/DIARY] 
Top events [M/DIARY]  Diaries [DIARY] Diaries Index [IND/DIARY] 
 (Reporting by Reuters bureaux, writing by Marton Dunai and
Sandor Peto; Editing by Susan Fenton)