CEE MARKETS 4-Zloty weakens with region, unaffected by rate cut

                                
 (Updates with dinar fall, fixed income, new prices)
                                
 By Jason Hovet and Marius Zaharia
                                
 PRAGUE/BUCHAREST, Jan 27 (Reuters) - The Polish zloty fell
in line with weakness in other regional currencies on Tuesday as
European shares declined, with dealers saying it was unaffected
by a larger than expected interest rate cut.
                                
 Poland's central bank cut its key rate by 75 basis points to
4.25 percent, more than the expected 50 bps, to combat the
economic downturn  [ID:nLR538672] [ID:nLR201464]
[ID:nWAR007839].
                                
 The zloty <EURPLN=> lost 0.3 percent from Monday's close at
4.369 to the euro after weakening beyond 4.40 for the first time
since September 2004 last week.
                                
 Dealers said the zloty moved in line with other currencies
and shrugged off the rate cut as many in the market had been
expecting a 75 basis point cut for the second month running.
                                
 "It is good that the council cut rates so sharply," said
Jacek Wisniewski, chief economist at Raiffeisen Bank. "Rates are
likely to fall to around 3 percent. Postponing the decision (to
cut aggressively) is pointless in such economic conditions."
                                
 Other regional currencies also lost ground against the euro
late on Tuesday , depressed by falling European shares
[ID:nLR64328].
                                
 Romania's leu <EURRON=> was 0.1 percent weaker, the
Hungarian forint <EURHUF=> lost 0.3 percent to 286.1 per euro,
while the Czech crown <EURCZK=> fell 0.3 percent.
                                
 Serbia's dinar <EURRSD=> fell to a new record low at 97.03
per euro on Tuesday, reflecting low liquidity and the absence of
central bank intervention [ID:nLR464760].
                                
 "Currencies are ... not as strong as they were in the
morning because of a slump in European shares," one Bucharest
dealer said.
                                
 The EBRD sees growth in central Europe and the Baltics at
0.4 percent this year from 3.9 percent last year [ID:nLR195309].
Polish Prime Minister Donald Tusk said his country's growth may
slow to 1.7 percent in 2009 [ID:nWSF000546].
                                
 Markets expect central banks across the region to continue
to cut interest rates.
                                
 Hungary has already taken back two-thirds of an October
emergency 300 basis point rate hike. Romania, one of the
region's more vulnerable economies, is seen joining the trend
next week.
                                
 Economists have warned the Czech economy could also contract
in 2009. The central bank has cut interest rates by 150 basis
points since August and is expected to cut another 50 basis
points next week.
                                
 In debt markets, Polish bonds strengthened slightly along
the curve after the decision.
                                
 "Yields dropped, but the move was not as significant as we
could expect," said a dealer at Warsaw-based bank.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  27.77    27.695  -0.27%    -3.66%
Polish zloty     <EURPLN=>   4.385    4.37   -0.34%    -6.16%
Hungarian forint <EURHUF=> 286.1    285.28   -0.29%    -7.88%
Croatian kuna    <EURHRK=>   7.36     7.4    +0.54%    +0.07%
Romanian leu     <EURRON=>   4.23     4.226  -0.09%    -5.1%
Serbian dinar    <EURRSD=>  96.545   95.526  -1.06%    -7.32%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -2 basis points to  105bps over bmk*
4-yr T-bond   CZ4YT=RR   +20 basis points to  +102bps over bmk*
8-yr T-bond   CZ8YT=RR   +23 basis points to  +123bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -8 basis points to  +304bps over bmk*
5-yr T-bond   PL5YT=RR    -8 basis points to  +250bps over bmk*
10-yr T-bond PL10YT=RR   +1 basis points to  +235bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -9 basis points to  +757bps over bmk*
5-yr T-bond   HU5YT=RR    -9 basis points to  +709bps over bmk*
10-yr T-bond   HU10YT=RR  -2 basis points to  +545bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1749 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 and
Marius Zaharia)