CEE MARKETS 3-FX give up earlier gains; zloty breaks key level

                                
 (Adds details, quotes, updates prices)
                                
 By Jason Hovet and Marius Zaharia
                                
 PRAGUE/BUCHAREST, Jan 7 (Reuters) - Central Europe's
currencies gave up early gains on Wednesday as faltering risk
appetite in the wake of grim economic news around the world
triggered a bout of profit-taking.
                                
 Poland's zloty <EURPLN=> started the day by adding another
one percent to the almost three percent gained on Tuesday, but
reversed to weaken later, falling beyond 4.0. By 1500 GMT, the
unit traded 0.8 percent down on the day at 4.009.
                                
 "There is no domestic reason behind the zloty's pullback, if
it's anything to be blamed, that will be a profit-taking after
this week's rally," said Bartosz Pawlowski, strategist at TD
Securities.
                                
 Adding to concerns, the deepening gas row between Russia and
Ukraine forced a steel plant in Romania to postpone restarting
activity as planned in January [ID:nL7563234] and the Suzuki
plant in Hungary to halt production [ID:nL7498684].
                                
 "The gas row was not the cause (for the profit-taking),
although markets are watching this," said TD Securities'
Pawlowski.
                                
 In the second half of 2008, regional currencies dropped
sharply from record highs as the global financial crisis
hammered the region, and the subsequent economic slide
threatened export-reliant economies in central Europe.
                                
 Analysts still see weakening pressures for these currencies
as central banks look to ease monetary policy and a new wave of
poor economic data is expected.
                                
 But most central European economies are still expected to
grow in 2009, while western European neighbours sink further
into recession, leading some dealers and analysts to believe
that the region's currencies and assets have been undervalued.
                                
 This has lifted regional currencies in recent days after a
steep falloff at the end of 2008, with the rebound led by the
zloty, which has added around 5 percent this week, after falls
of around 30 percent from summer highs.
                                
 The Hungarian forint <EURHUF=> tracked zloty moves as well.
It fell 1.4 percent, at 268.7 per euro.
                                
 "The zloty was pushed through 3.9 (in early trade), the
forint tracked it, but after stop loss levels were knocked out
in both markets, the direction turned," one Budapest-based
dealer said.
                                
 Romania's leu <EURRON=> also fell 1.1 percent and hit a new
four-year low of 4.1260 per euro, although the central bank left
interest rates unchanged at 10.25 percent on Tuesday, bucking
the regional trend and signalling concerns about leu's weakness.
                                
 "Foreigners are selling the leu," one dealer said. "Romania
may be the only one to leave rates on hold, but it's also the
only one rated below investment-grade."
                                
 Fixed income markets remained illiquid, although bond and
interest rate swap yields rose as the forint weakened.
                                
 "But there is no big change, activity is low," one trader
said.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2008 
Czech crown      <EURCZK=>  26.06    26.117  +0.22%   +2.59%
Polish zloty     <EURPLN=>   4.009    3.977  -0.8%    +2.58%
Hungarian forint <EURHUF=> 268.7    265.03   -1.38%   -1.95%
Croatian kuna    <EURHRK=>   7.301    7.285  -0.22%   +0.87%
Romanian leu     <EURRON=>   4.106    4.061  -1.11%   -2.28%
Serbian dinar    <EURRSD=>  92.92    92.93   +0.01%   -3.84%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +4 basis points to  176bps over bmk*
5-yr T-bond   CZ5YT=RR   +1 basis points to  +154bps over bmk*
10-yr T-bond   CZ9YT=RR    -6 basis points to  +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -2 basis points to  +337bps over bmk*
5-yr T-bond   PL5YT=RR   +2 basis points to  +274bps over bmk*
10-yr T-bond PL10YT=RR    -3 basis points to  +224bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +10 basis points to  +772bps over bmk*
5-yr T-bond   HU5YT=RR   +8 basis points to  +700bps over bmk*
10-yr T-bond   HU10YT=RR +9 basis points to  +523bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1701 CET.
Currency percent change calculated from the daily domestic 
close at 1500 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news [EMRG]
Spot FX rates
Eastern Europe spot FX <EEFX=>    Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=>       Latin America spot FX <LATAMFX=>
Other news and reports  
World central bank news [CEN]  Economic Data Guide <ECONGUIDE> 
Official rates [GLOBAL/INT]  Emerging Diary [EMRG/DIARY] 
Top events [M/DIARY]  Diaries [DIARY] Diaries Index [IND/DIARY] 
 (Reporting by Reuters bureaus, writing by Jason Hovet and
Marius Zaharia; Editing by...)