CEE MARKETS 2-Zloty down on FX contracts concerns

                                
 (Releads on zloty, adds fixed income)
                                
 By Dagmara Leszkowicz
                                
 WARSAW, Dec 10 (Reuters) - The Polish zloty fell almost 1
percent on Wednesday on concerns that Polish companies are
overexposed to hard currency hedging, while the Czech crown also
slid following worse than expected third quarter growth data.
                                
 At 1008 GMT the Polish currency was 0.9 percent down versus
the euro at 3.958. Polish bonds also weakened. The Czech crown
<EURCZK=> was down almost 0.5 percent.
                                
 Polish officials and some companies have said the corporate
sector may have to write off millions of euros after hedging
contracts went the wrong way due to a fall of 25 percent in the
zloty's rate against the euro since August.
                                
 The zloty had appreciated rapidly through the first half of
the year, prompting exporters to hedge against a further rise
through option contracts. Those deals are now losing money due
to the zloty's decline.
                                
 "It is still unclear whether it is only a rumour or a real
threat ... but as soon as it becomes clear we may expect the
zloty to depreciate further," said Robert Kesicki, dealer at
Kredyt Bank.
                                
 The Polish currency has lost more than 10 percent against
the euro since the beginning of the year, underperforming the
region in general.
                                
 In the Czech Republic, data showed the economy there grew by
4.2 percent in the third quarter, below a 4.7 percent flash
estimate released in November. The data also confirmed
second-quarter growth at 4.6 percent.
                                
 "Thanks to the downward revision the likelihood of a
significant cut in interest rates is rising," said David Marek,
chief economist at Patria Finance.
 Other currencies remained relatively steady, with the
Romanian leu <EURRON=> slightly firmer despite continued
political uncertainty there.
                                
 Coalition talks after Romania's inconclusive parliamentary
election were set to continue on Wednesday, with the leftist
Social Democrats and centrist Democrat-Liberals yet to agree on
some policies and whether to include a small ethnic Hungarian
party in the mix [ID:nL9230297].
                                
 President Traian Basescu is expected to nominate a prime
minister later on Wednesday.
                                
 "The reason we saw a 3.9 level (to the euro) is ... because
coalition talks are slow. At this point, investors just want to
see a government in place," said a dealer with a Bucharest-based
foreign bank.
                                
 "Then they will want to see the first measures the new
government takes."
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2008 
Czech crown      <EURCZK=>   25.843   25.74   -0.4%     +2.47%
Polish zloty     <EURPLN=>   3.958    3.924   -0.87%    -9.93%
Hungarian forint <EURHUF=>   262.57   262.56   0%       -3.84%
Croatian kuna    <EURHRK=>   7.19     7.19     0%       +1.86%
Romanian leu     <EURRON=>   3.882    3.89    +0.21%    -8.43%
Serbian dinar    <EURRSD=>   84.393   83.71   -0.82%    -7.15%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +15 basis points to  157bps over bmk*
5-yr T-bond   CZ5YT=RR   +3 basis points to  +140bps over bmk*
10-yr T-bond   CZ9YT=RR   +3 basis points to  +109bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +2 basis points to  +323bps over bmk*
5-yr T-bond   PL5YT=RR    -11 basis points to  +273bps over bmk*
10-yr T-bond PL10YT=RR    -8 basis points to  +236bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -46 basis points to  +740bps over bmk*
5-yr T-bond   HU5YT=RR    -52 basis points to  +693bps over bmk*
10-yr T-bond   HU10YT=RR +8 basis points to  +521bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1008 CET.
Currency percent change calculated from the daily domestic 
close at 1500 GMT.
                                
 
                                
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 (Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz)