CEE MARKETS 2-FX firm on growth boost, zloty below 4.0 to euro

                                
 * FX rise, stocks add support
                                
 * Polish central bank chief says rate hike possible
                                
 * GDP in region mostly better, analysts still wary
                                
 
  (Adds bonds, updates prices)
                                
 By Jason Hovet
                                
 PRAGUE, Aug 13 (Reuters) - The zloty extended gains on
Friday after Poland's central bank governor said an interest
rate rise was still likely this year, while better economic data
for central Europe buoyed other currencies.
                                
 Second quarter gross domestic product mostly came out above
expectations in the Czech Republic, Hungary and Romania, with
the latter returning to quarterly growth -- though analysts
expect the return may only be brief. [ID:nLDE67C0CN]
                                
 Czech GDP grew a touch above forecasts quarter-on-quarter at
0.8 percent, [ID:nLDE67C08T]while the region's major trading
partner Germany stunned markets by announcing the fastest
quarterly growth since its reunification. [ID:nLDE67B1I5]
                                
 "My estimate is that the (Czech) figure will be revised up
due to the fact that Germany showed much more significant growth
than expected," said Martin Lobotka, analyst at Ceska
Sporitelna.
                                
 "The Czech growth was driven by manufacturing, same as in
the first quarter. In an annual comparison, we saw a significant
improvement in market services and that is another sign that
maybe in the second quarter the recession ended even for
consumers."
                                
 The Romanian leu <EURRON=> was flat, and the Czech crown
<EURCZK=> edged a touch weaker to 24.755 per euro but held below
the technical level of 24.800. Czech bonds rallied on the long
end, with the 9-year yield <CZ1002471=> a touch lower after
hitting a lifetime low this week.
                                
 Stock markets also added support, with up to 1 percent gains
in Budapest <.BUX> and Bucharest <.BETI> by 0856 GMT.
                                
 
                                
 DOUBTS REMAIN
                                
 There are still strong doubts about the second half of this
year, however, as budget cuts kick in across Europe, and
analysts are looking particularly closely at Hungary, which
withdrew last month from talks over IMF support.
                                
 Like Romania, Hungary has struggled to get out of recession
and while it grew an annual 1 percent in the second quarter, the
economy still stalled from the first quarter, showing how
fragile its recovery is. [ID:nLDE67C0E0]
                                
 "This zero quarter-on-quarter growth seems negative news as,
if we look at Czech data, external conditions do not seem to
justify this," said Zoltan Adam, of Takarekbank in Budapest.
                                
 "In this respect the data is worse than expectations and is
a warning sign concerning the fragility of the Hungarian
economic recovery."
                                
 The forint <EURHUF=> was up 0.3 percent on the day to lead
gains in central Europe, however, bidding at 279.48 per euro.
                                
 Hungary bond yields inched down by up to 3 basis points,
gaining momentum from solid auctions on Thursday where the debt
agency sold more than planned for a third time in a row.
                                
 "Yesterday's auction set the tone and now we're cruising
into the weekend," said a Budapest fixed income dealer.
                                
 The zloty <EURPLN=> added 0.1 percent to 3.993 per euro
after breaking to the weak side of the psychological 4.0 level
overnight. Central bank head Marek Belka said in a radio
interview with Poland's Tok FM Radio that an interest rate hike
from a record low was possible this year. [ID:nLDE67C0AX]
                                
 Other emerging European central banks are expected to keep
interest rates at record lows into 2011 and beyond.
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>   24.77    24.757  -0.05%   +6.25%
Polish zloty     <EURPLN=>    3.993    3.998  +0.13%   +2.78%
Hungarian forint <EURHUF=>  279.48   280.3    +0.29%   -3.27%
Croatian kuna    <EURHRK=>    7.23     7.229  -0.01%   +1.1%
Romanian leu     <EURRON=>    4.229    4.228  -0.02%   +0.2%
Serbian dinar    <EURRSD=>  104.82   104.913  +0.09%   -8.53%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -5 basis points to  119bps over bmk*
7-yr T-bond   CZ7YT=RR    -4 basis points to  +109bps over bmk*
10-yr T-bond   CZ9YT=RR    -2 basis points to  +107bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -4 basis points to  +594bps over bmk*
5-yr T-bond   HU5YT=RR    -4 basis points to  +543bps over bmk*
10-yr T-bond   HU10YT=RR  -4 basis points to  +464bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1058 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 Patrick Graham/Ruth Pitchford)