CEE MARKETS 3-Zloty recovery helps currencies firm, leu flat

                                
 (Updates with new prices, comments.)
                                
 BUDAPEST/WARSAW, Jan 6 (Reuters) - Central European
currencies firmed on Tuesday and dealers said global risk
appetite seemed to have improved in the first days of the year.
                                
 The optimism may not last, however, given that the global
financial and economic crisis is weighing on the region's
economies, while cuts in natural gas supply from Russia is 
generating political tension in the short term.
                                
 The leu <EURRON=> bucked the day's firming trend and was
flat even though Romania's central bank decided to keep interest
rates on hold rather than join other central banks in the region
in aggressive rate cutting.
                                
 The dinar <EURRSD=> hit record lows at 93.21 per euro and
stayed near that level, despite continued market intervention by
Serbia's central bank, because domestic oil and telecom
companies needed to buy foreign currency. [ID:nL6584018]
                                
 Gains in the region were led by Poland's zloty <EURPLN=>
which firmed 2.46 percent against the euro by 1522 GMT to 4.011.
                                
 The zloty was recovering from deep losses caused by the
closing of derivatives positions last year and its rise also
helped the Czech crown <EURCZK=> which strengthened by 0.41
percent to 26.312 per euro and the Hungarian forint <EURHUF>
which firmed by 0.17 percent to 265.80.
                                
 "In the long term the zloty is undervalued (if it stays)
above 4 zlotys per euro ... My view on Polish economy is that
despite the slowdown it would almost certainly outperform the
rest of the region," said Juliet Sampson, economist at HSBC in
London.
                                
 "Over time fundamental factors will become more important
... Some of that recognition will contribute to a stronger
zloty," she added.
                                
 The forint lagged behind the crown and the zloty after
Hungarian central bank Governor Andras Simor said the bank
wanted to cut interest rates as fast as possible and that it
could meet its inflation target even with a weaker currency.
[ID:nL6439332]
                                
 Some market participants were optimistic that improved
sentiment in emerging markets may buoy the forint even if
interest rates are cut, while others said the economy's expected
slide into recession will weaken the currency.
                                
 "The current optimism will not be lasting, many people think
now that we are over the worst ... but painful things like
unemployment are still ahead," one dealer said.
                                
 The leu is also regarded as vulnerable because of Romania's
current account deficit of about 13 percent of GDP and the
impact of a government spending spree ahead of elections held in
November.
                                
 "In our view, the leu weakness and the marked deterioration
in the fiscal situation led the (central) bank to keep rates on
hold," Citigroup analysts said in a note.
                                
 "The absence of an improvement on the fiscal front and
further depreciation of the currency may lead the central bank
to postpone its easing," the analysts added. "Conversely, an IMF
programme and a recovery of the leu may enable the bank to cut
more aggressively than our current expectations."
  ----------------------MARKET SNAPSHOT-------------------------
 Currency                    Latest   Previous Local    Local
                                
                                   close    currency currency
                                
                                            change   change
                                
                                            today    in 2008 
 Czech crown      <EURCZK=>  26.312   26.42   +0.41%     +0.7%
 Polish zloty     <EURPLN=>   4.011    4.112  +2.46%    -11.4%
 Hungarian forint <EURHUF=> 265.8    266.25   +0.17%     -5.12%
 Croatian kuna    <EURHRK=>   7.299    7.299   0%        +0.38%
 Romanian leu     <EURRON=>   4.057    4.058  +0.02%    -13.32%
 Serbian dinar    <EURRSD=>  92.91    89.525  -3.78%    -17.97%
                                
 Yield Spreads
 Czech treasury bonds <0#CZBMK=>
 3-yr T-bond  CZ3YT=RR   +2 basis points to  175bps over bmk*
 5-yr T-bond  CZ5YT=RR  -11 basis points to  +154bps over bmk*
 10-yr T-bond CZ9YT=RR  -14 basis points to  +100bps over bmk*
                                
 
 Hungarian treasury bonds <0#HUBMK=>
 3-yr T-bond  HU3YT=RR  -54 basis points to  +767bps over bmk*
 5-yr T-bond  HU5YT=RR  -68 basis points to  +690bps over bmk*
 10-yr T-bond HU10YT=RR  -9 basis points to  +524bps over bmk*
 *Benchmark is German bond equivalent.
 All data taken from Reuters at 1622 CET.
 Currency percent change calculated from the daily domestic

close at 1500 GMT.
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 (Reporting by Reuters bureaus, Writing by Sandor
Peto/Dagmara Leszkowicz; Editing by Ruth Pitchford)