CEE MARKETS 3-Euro drags FX lower despite economic growth

                                
 * Currencies turns south as euro weakens on profit-taking
                                
 * GDP in region mostly better but some may be weak in H2
                                
 * Poland CPI below forecast, rate hike talk seen premature
                                
 
 (Recasts throughout)
                                
 By Jason Hovet and Marton Dunai
                                
 PRAGUE/BUDAPEST, Aug 13 (Reuters) - East European currencies
turned south late on Friday as market euphoria over Germany's
record second-quarter GDP growth gave way to concerns over
whether emerging economies could capitalise on that growth.
                                
 Investors sold assets deemed riskier, denting stock markets
and the euro. [ID:nLDE67C0J9] That hurt emerging European
currencies, but they shook off higher than expected U.S.
inflation data later in the day.
                                
 The Czech crown <EURCZK=> gave up early gains and slid 0.3
percent against the euro by 1325 GMT, followed by a 0.2 percent
dip in the Polish zloty <EURPLN=> and a 0.1 percent slide in the
Hungarian forint <EURHUF=> and the Romanian leu <EURRON=>.
                                
 Germany, the region's major trading partner, said its GDP
grew at the fastest pace since reunification. [ID:nLDE67B1I5]
                                
 Emerging European countries also grew faster than expected
in the second quarter, but analysts said some, especially
Hungary and Romania, could fall on tougher times in the rest of
the year as weak domestic demand leaves them dependent on
exports for growth. [ID:nLDE67C09Y]
                                
 Austerity measures in Romania, agreed with the IMF in July
in exchange for aid, could keep the economy in recession until
the second half of 2011, analysts have said.
                                
 Hungary was also seen as vulnerable.
                                
 "(There is) a notable divergence between Hungarian and
German overall GDP... (an) extreme lopsidedness of the Hungarian
recovery, which thus far remains driven by exports alone,"
Barclays Capital said in a note to clients.
                                
 Stock markets were mixed, with Budapest <.BUX> sliding half
a percent and Warsaw <.WIG> 0.2 percent by 1319 GMT. Prague
<.PX> was a third of a percent higher and Bucharest <.BETI> was
up half a percentage point.
                                
 
                                
 POLISH CPI SURPRISE
                                
 Polish consumer prices <PLCPIY=ECI> rose 2 percent in July,
slower than market expectations for 2.2 percent.
                                
 "This does not change the (rate) outlook," said Gregorz
Maliszewski, chief economist at Millennium Bank in Warsaw. "We
stick to the forecast of a hike in the fourth quarter."
                                
 However, central bank rate setter Elzbieta Chojna-Duch told
Reuters after the data that rate hikes were premature.
[ID:WSF009370] Bond yields dipped 1-2 basis points in Warsaw on
cooling expectations of monetary tightening.
                                
 Czech bond yields were a touch lower on the long end after
hitting a lifetime low this week. Hungarian bond yields also
dipped, especially on the short end.
                                
 "For reasons beyond me, Hungarian debt is resilient," a
dealer in Budapest said. "I see U.S. real money investors buying
bonds at every auction. To them, these yields are awesome. They
look at high returns and all but ignore fundamentals."
                                
 Despite recent gains and growth, there are still strong
doubts about the second half of this year as budget cuts kick in
across Europe, and analysts are looking particularly closely at
Hungary, which withdrew last month from talks over IMF support.
                                
 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]
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>  24.821   24.757   -0.26%   +6.03%
Polish zloty     <EURPLN=>   4.006    3.998   -0.2%    +2.45%
Hungarian forint <EURHUF=>  280.65    280.3   -0.12%   -3.67%
Croatian kuna    <EURHRK=>   7.229    7.229    0%      +1.11%
Romanian leu     <EURRON=>   4.231    4.228   -0.07%   +0.15%
Serbian dinar    <EURRSD=>  104.56  104.913   +0.34%   -8.3%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -5 basis points to   +97bps over bmk*
7-yr T-bond   CZ7YT=RR    -2 basis points to  +111bps over bmk*
10-yr T-bond  CZ9YT=RR    +6 basis points to  +104bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +3 basis points to  +416bps over bmk*
5-yr T-bond   PL5YT=RR   -2 basis points to  +392bps over bmk*
10-yr T-bond PL10YT=RR   +2 basis points to  +338bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   -3 basis points to  +597bps over bmk*
5-yr T-bond   HU5YT=RR   +2 basis points to  +553bps over bmk*
10-yr T-bond  HU10YT=RR  +4 basis points to  +472bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1525 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)