CEE MARKETS 1-FX weakens, inflation data in focus

                                
 BUDAPEST, March 9 (Reuters) - Eastern European currencies
weakened slightly in Wednesday trade, with the Czech crown under
pressure after data showed inflation was lower in February than
forecast, dampening expectations that interest rates will rise.
                                
 Annual inflation in the Czech Republic in February was 1.8
percent, below market expectations of 2.0 percent.
[ID:nLDE7271NQ]
                                
"The Czech Republic does not necessarily have to follow
Hungary or Poland, where rates have already risen," Patria
Finance chief economist David Marek said.
                                
 "If some inflation pressures emerge, they will be pressures
only from external factors like the development of commodity
prices on international markets."
                                
 CSOB trader David Sykora said the crown was trading around
24.30 to the euro, continuing on a weaker trend.
                                
 Czech consumer prices rose just 0.1 percent in February from
the previous month, while annual inflation was 1.8 percent,
below market expectations of 2.0 percent and below the central
bank's 2.1 percent forecast and its 2 percent target mid-point.
                                
 Markets had raised bets in the past week that the central
bank would start raising rates by mid-2011 from a historic low
of 0.75 percent after the European Central Bank unexpectedly
signalled a euro zone rate rise could come as early next month.
                                
 That was supportive for the crown but dealers said the Czech
currency had come under pressure on Tuesday from a bank's
dividend payment in the market.
                                
 Sentiment towards riskier emerging market assets has also
tuned negative as the euro zone debt crisis comes back into
focus ahead of a European Union summit later this week.
                                
 Euro zone leaders are set to take the next cautious steps in
their year-long effort to quell the region's debt crisis, but
Friday's meeting is unlikely to produce a breakthrough.
                                
 The euro, the reference currency for most of Eastern Europe,
fell versus the dollar on Wednesday.
                                
 "It looks like risk-off at the moment," a Prague dealer
said. "There is some risk aversion due to (credit default swap)
prices rising for Portugal and some talk of Greece problems."
                                
 Hungary will publish inflation data on Friday, which are
expected to show a pickup in annual inflation to 4.2 percent
<HUCPIY1> from 4.0 percent in January. [ID:nLDE7271JH]
                                
 But analysts said the central bank -- which increased its
key rate by 75 basis points between November and January but
held rates last month -- was likely to keep rates unchanged at
the current level of 6 percent for the next few months.
                                
 The bank will publish the main figures from its inflation
report on March 28 with updated forecasts, and will hold a
policy meeting at which two new rate-setters elected on Monday
will take part in decision making for the first time.
                                
 They took a cautious line on policy in their first remarks
on Monday. [ID:nLDE7260T3]
                                
 Hungary's reform programme to cut spending and debt assumes
3-3.5 percent economic growth in 2013, well below earlier
government forecasts, Economy Ministry Secretary of State Andras
Karman told Reuters late on Tuesday. [ID:nLDE7272C3]
                                
 By 1055 GMT the Hungarian forint <EURHUF=> and Polish zloty
<EURPLN=> were down 0.2 percent, while the Czech crown <EURCZK=>
lost about 0.2 percent and the Romanian leu <EURRON=> was flat.
                                
 Data earlier in the day showed Romania's adjusted industrial
output <ROIP=ECI> was up 1.0 percent on the month in January and
rose 10.6 percent year-on-year. [ID:nLDE7271XC] [ID:nBCR000128]
                                
 Inflation will probably be at an annual 7.2-7.5 percent by
summer of this year before falling below 4 percent by the end of
2011, central bank Governor Mugur Isarescu said. [ID:nLDE7280JU]
 --------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2011 
Czech crown      <EURCZK=>   24.282    24.245   -0.15%   +2.96%
Polish zloty     <EURPLN=>   3.976    3.967     -0.23%    -0.45%
Hungarian forint <EURHUF=>   272.74    272.25   -0.18%   +1.92%
Croatian kuna    <EURHRK=>   7.398    7.4       +0.03%    -0.24%
Romanian leu     <EURRON=>   4.189    4.188     -0.02%   +1.05%
Serbian dinar    <EURRSD=>   103.47    103.51   +0.04%   +2.37%
*Benchmark is German bond equivalent.
All data taken from Reuters at 1155 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
                                
 Warsaw stocks <.WIG> were also down 0.5 percent, while the
Prague <.PX> bourse was down 0.2 percent.
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 (Reporting by Krisztina Than; Editing by Catherine Evans)