CEE MARKETS 3-FX fall on data boosting rate cut expectations

                                
   (Recasts with new prices, comments.)
                                
 BUDAPEST/BUCHAREST, Jan 14 (Reuters) - Central European
currencies shed early gains on Wednesday, as new figures
including a record drop in Czech industrial output bolstered
expectations for further monetary easing in the region.
                                
 The Czech crown<EURCZK=>, Hungary's forint<EURHUF=> and the
Polish zloty <EURPLN=> shed about one percent and the Romanian
leu<EURON=> also resumed weakening after Tuesday's rebound which
dealers said was caused by central bank intervention.
                                
 Economic figures in Europe depict a gloomy outlook for 2009,
increasing pressure on central banks in Central Europe to cut
interest rates, weakening support to their currencies.
                                
 "Investors are looking at problems in other European Union
countries, too, like Greece or Ireland. Bad figures are coming
out everywhere and the impact on Central Europe is a complete
halt in taking risk," one Budapest-based currency trader said.
                                
 While industrial output in the euro zone fell by 7.4 percent
in annual terms in November, Czech figures showed a record 17.4
percent plunge [ID:nLE423233] [ID:nPRG001193].
                                
 The Czech crown fell beyond 27.00 against the euro, its
weakest levels since November 2007, and at 1452 GMT it traded at
27.032 against the euro, down by 1.08 percent from Tuesday.
                                
 "However, even if the crown weakens in reaction to the data,
the message for the central bank is clear: interest rates must
go down further and quite radically," Radomir Jac, chief analyst
with Generali PPF Asset Management.
                                
 The forint weakened by 0.89 percent to 279.75 against the
euro and Hungarian government bonds also reversed early rises,
after Prime Minister Ferenc Gyurcsany said the economy can
contract 2-3 percent this year rather than one percent earlier
projected by the government.
                                
 Despite the forint's fall, the Hungarian central bank is
expected to cut its 10.0 percent base rate on Monday.
                                
 "The market expects a 25 or 50 basis point cut, that's why
we saw buying appetite in early trade," one fixed income trader
said. "When the forint eased past 280, some doubts appeared,
that's the game we are playing now."
                                
 In Poland, the zloty eased 0.89 percent to 4.176 per euro.
Poland's annual inflation slowed to 3.3 percent in December from
3.7 percent in November.[ID:nLE136006]
                                
 "I think the Polish Monetary Policy Council is ready to cut
by 50 basis points in January and by 50 basis points again in
February," said Anders Svendsen, analyst at Nordea Bank.
                                
 Romania's leu shed 1.56 percent and traded at 4.298 against
the euro.
                                
 Investors are worried about the country's external
imbalances but they fear a central bank intervention if the
exchange rate goes beyond 4.3-4.35 per euro.
                                
 On Tuesday, dealers said the central bank intervened at 4.35
and brought the leu below 4.3, signalling these were levels of
discomfort for monetary policy makers.
                                
 "There is a slight fear felt by the market to seriously
attack the 4.3 level," one dealer said.
                                
 The global crisis continued to create damage in the region
this year, hitting currencies as recession fears mounted and
central banks began cutting rates to boost economies. A dragging
Russia-Ukraine gas row has also added to concerns.
                                
 On Wednesday, a wave of bad news for currencies hit the
region. In Serbia, the central bank governor said he favours a
cut in the key interest rate. [ID:nLE397932] The dinar <EURRSD=>
weakened slightly after the comments at 92 per euro.
  ----------------------MARKET SNAPSHOT-------------------------
 Currency                    Latest   Previous Local    Local
                                
                                   close    currency currency
                                
                                            change   change
                                
                                            today    in 2009 
 Czech crown      <EURCZK=>  27.032   26.74    -1.08%    -1.03%
 Polish zloty     <EURPLN=>   4.176    4.139   -0.89%    -1.46%
 Hungarian forint <EURHUF=> 279.75   277.25    -0.89%    -5.79%
 Croatian kuna    <EURHRK=>   7.327    7.334   +0.1%     +0.52%
 Romanian leu     <EURRON=>   4.298    4.231   -1.56%    -6.6%
 Serbian dinar    <EURRSD=>  92.04    91.61    -0.47%    -2.78%
                                
 Yield Spreads
 Czech treasury bonds <0#CZBMK=>
 2-yr T-bond  CZ2YT=RR   -8 basis points to  +139bps over bmk*
 4-yr T-bond  CZ4YT=RR  -17 basis points to  +144bps over  bmk*
 8-yr T-bond  CZ8YT=RR   +7 basis points to  +123bps over bmk*
 Hungarian treasury bonds <0#HUBMK=>
 3-yr T-bond   HU3YT=RR   +12 basis points to  +817bps over bmk*
 5-yr T-bond   HU5YT=RR   +15 basis points to  +770bps over bmk*
 10-yr T-bond  HU10YT=RR  +19 basis points to  +610bps over bmk*
 *Benchmark is German bond equivalent.
 All data taken from Reuters at 1552 CET.
 Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus, writing by Sandor Peto/Marius
Zaharia, editing by Victoria Main)