CEE MARKETS 1-FX mostly inch up, Prague stocks continue rise

                                
 * Prague stocks at 7-month high on year-end rally
                                
 * FX cautiously up before holiday period, forint leads
                                
 * Hungary parliament to back budget on Thursday
                                
 
                                
 PRAGUE, Dec 23 (Reuters) - Prague stocks rose for a fifth
straight session on Thursday, while central European currencies
were a touch stronger in quiet trade as investors protected
profits going into the holiday period.
                                
 The zloty <EURPLN=> inched up 0.2 percent but held within
recent ranges after the Polish central bank sounded a more
hawkish tone on Wednesday, adding to expectations policymakers
there will be the next to start tightening policy in the region.
 The Polish central bank left interest rates on hold, along
with the Czech bank, on Wednesday. Polish central bank Governor
Marek Belka said after that a decreased risk of capital inflows
into the country tilted "the risk balance in favour of rate
hikes". 
                                
 The Czechs have left open all options on policy, a view
confirmed by Governor Miroslav Singer after Wednesday's meeting.
Hungary was the first in central Europe to raise interest rates,
with 50 basis points in hikes since November. [ID:nLDE6BL1NL]
                                
 The crown <EURCZK=> dipped 0.1 percent to a new five-month
low, bidding at 25.3 to the euro by 0920 GMT. Romania's leu
<EURRON=> was steady around 4.28 per euro.
                                
 The forint <EURHUF=> led gains in the region, up more than
0.2 percent before Hungary's parliament signs off on the 2011
budget that takes advantage of one-off revenues and forgoes
tough spending cuts. Markets are looking toward February, when
the government plans to unveil new reforms. [ID:nLDE6BL19O]
                                
 The Prague bourse <.PX> rose 0.4 percent to a new
seven-month peak as other indexes in the region were mixed. The
market has gained 11 percent this month to lead the region in a
year-end global stocks rally fuelled by better growth outlooks.
                                
 "The rally started slower in Prague, but managed to catch
up," said Viktor Reischig, a trader with Prague broker Patria
Finance.
                                
 "There is a little window-dressing toward the end of the
year, mainly an adjustment in some prices mainly in lower-liquid
stocks."
                                
 
                                
 BUDGET STAMPS
                                
 With Hungary's government holding a two-thirds majority,
analysts see little risk of its budget not passing. 
                                
 The government has pledged to become the first next year
since Hungary joined the European Union in 2004 to cut the
fiscal gap below 3 percent of gross domestic product (GDP),
making it a top performer in the 27-member bloc.
                                
 Romania's parliament approved on Wednesday an austere 2011
budget that will further cut the recession-hit country's fiscal
gap, a key requirement for maintaining a 20 billion euro IMF aid
package.
                                
 Hungary is coming off an IMF aid deal and plans to issue
foreign bonds worth 4 billion euros "as soon as possible" next
year to refinance expiring debt and begin repaying parts of its
international aid -- which will be a strong test of investor
confidence.
                                
 "It looks like they want to issue all the 4 billion euros in
the first half, so this (and the rating pressure) can in theory
exert pressure on the government to table a package (of reforms)
acceptable to markets," said analyst Sandor Jobbagy at CIB.
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>   25.3     25.272  -0.11%    +4.02%
Polish zloty     <EURPLN=>    3.978    3.986  +0.2%     +3.17%
Hungarian forint <EURHUF=>  275.73   276.35   +0.22%    -1.95%
Croatian kuna    <EURHRK=>    7.383    7.391  +0.11%    -1%
Romanian leu     <EURRON=>    4.281    4.283  +0.05%    -1.02%
Serbian dinar    <EURRSD=>  106.03   107.17   +1.08%    -9.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -17 basis points to  75bps over bmk*
7-yr T-bond   CZ7YT=RR   +1 basis points to  +91bps over bmk*
10-yr T-bond   CZ9YT=RR   +1 basis points to  +93bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1021 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 Stephen Nisbet)