CEE MARKETS 3-FX weaken, crown in lead on dovish cbank tone

                                
 * Crown extends losses on rate cut expectations
                                
 * Politics hangs on Romanian leu
                                
 * Zloty, forint give up recent gains
                                
 
 (Updates with bond tenders)
                                
 By Jason Hovet
                                
 PRAGUE, Oct 7 (Reuters) - The Czech crown slipped to its
lowest in a month on Wednesday on a more dovish stance from key
policymakers, leading a drop in central European currencies.
The Polish zloty and Hungarian forint gave up some gains
seen in this week's rally, while politics dragged on the
Romanian leu as the government sought a confidence vote.
                                
 The crown hit its lowest since the start of September
following comments this week from central bank chief Zdenek Tuma
in an interview with Reuters. He said the bank's board discussed
market intervention against the crown's firming at September's
policy meeting as a possible way to ease policy. [ID:nL58899]
                                
 Tuma along with Vice-Governor Miroslav Singer were in the
minority at the last meeting in voting for a rate cut, which
markets have taken as a signal that rates could go lower at
November's meeting. [ID:nL2194111]
                                
 Singer said on Tuesday the central bank will likely return
to discussing tools to ease policy. [ID:nL69414]
                                
 "We've seen strong corporate demand for euros... Oil has
been dripped on the fire by the recent central bank comments,"
said one Prague dealer. "I think 25.700/750 level could be the
top of the range of this move, but overall we could be heading
back again to 26 (to the euro)."
                                
 The crown <EURCZK=>, which bid 0.5 percent lower at 25.694
to the euro by 1025 GMT, is the only major currency in the
region to show a rise this year and has not traded weaker than
26 per euro since August.
                                
 On bond markets, yields were mixed after the Finance
Ministry sold a robust 7.5 billion Czech crowns in 15-year
bonds, with demand double what was sold. [ID:nPRA004794]
                                
 Poland also sold all 2-year bonds on offer at a tender, with
demand reaching almost three times the amount. [ID:nWAR008623]
Dealers said markets were ignoring an expected government
reshuffle, which does not include the finance minister's post.
[ID:nL7558924]
                                
 
                                
 PULLBACK
                                
 Shorter-dated Hungarian bonds strengthened on Wednesday,
boosted by increasing interest from foreign funds, dealers said.
                                
 In Hungary, the forint <EURHUF=> dipped 0.3 percent to bid
at 267.5 to the euro, while the zloty <EURPLN=> dropped a touch
to 4.188 per euro on profit-taking.
                                
 Both currencies have gained this week after a ratings
upgrade from Standard & Poor's boosted the forint last Friday
and the zloty rallied on relief a government deal with Dutch
firm Eureko would limit conversion of a large dividend payout on
the open market. [ID:nL2639199]
                                
 "The S&P uprate gave the forint a boost last week, and a
positive global mood has helped it retain those gains," a
Budapest dealer said. "We're staying here until something,
probably an unfavourable core market development, pushes the
forint weaker."
                                
 A regional Reuters poll showed on Tuesday that Central
European currencies are expected to post modest gains against
the euro in the next months, while the zloty is seen surging
about 8 percent over 12 months [ID:nL6501426]
                                
 In Romania, political uncertainty continued to hold back the
leu, which dipped 0.1 percent. 
                                
 Romania's minority government called on Tuesday for a
parliamentary vote of confidence, in a test of the opposition's
support for IMF-prescribed pension reforms before a November
presidential election. [ID:nL6297780]
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   25.694   25.572   -0.47%    +4.12%
Polish zloty     <EURPLN=>    4.188    4.186   -0.05%    -1.74%
Hungarian forint <EURHUF=>  267.51   266.82    -0.26%    -1.48%
Croatian kuna    <EURHRK=>    7.256    7.255   -0.01%    +1.5%
Romanian leu     <EURRON=>    4.264    4.258   -0.14%    -5.85%
Serbian dinar    <EURRSD=>   93.02    93.02     0%       -3.81%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +3 basis points to  164bps over bmk*
7-yr T-bond   CZ7YT=RR    -2 basis points to  +173bps over bmk*
10-yr T-bond  CZ10YT=RR    -2 basis points to  +165bps over bmk*

Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -6 basis points to  +542bps over bmk*
5-yr T-bond   HU5YT=RR   +1 basis points to  +517bps over bmk*
10-yr T-bond   HU10YT=RR +1 basis points to  +464bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1231 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 Ruth Pitchford and Toby Chopra)