CEE MARKETS 3-Currencies steady, forint recovers after tax row

                                
  (Updates throughout)
                                
 PRAGUE, Sept 2 (Reuters) - Emerging European currencies
steadied after recent losses in afternoon trade on Tuesday, with
Hungary's forint recovering after a bout of political turmoil.
                                
 The forint recovered from early losses to gain on the day,
with analysts playing down chances that a rift between the
minority ruling Socialists and their previous allies the Free
Democrats could spark an early election.
                                
 The Czech crown also rose for the first time in eight days,
despite a strong dollar weighing on regional currencies, and
dealers said the pickup looked mainly technical.
                                
 "This is a typical technical correction... that is healthy.
But the trend is still higher (weaker)," a Prague dealer said.
                                
 Markets were rattled by the Free Democrats pledge over the
weekend to reject the Socialist minority government's tax cut
programme, which will be a key part of next year's budget.
                                
 But analysts say the smaller party would almost certainly
fail to get back into parliament at a snap election and predict
its calls for an end to the Socialist administration is a bluff.
See [ID:nL2248872] for more. 
                                
 The forint <EURHUF=> rose 0.2 percent to 237.66 per euro by
1519 GMT, finding resistance at 239 to the euro to limit losses.
                                
 The dollar's gains against the euro have hurt currencies
across former communist central Europe as investors shifted
positions to the greenback and evidence grew that a euro zone
slowdown was showing up in the region's economies.
                                
 At the same time, investor wariness to the region has risen
along with tensions between Russia and Georgia.
                                
 The Polish zloty <EURPLN=> fell to 3.35 a euro from 3.346 at
Monday's domestic close, while the Czech crown <EURCZK=> jumped
to 24.71 to the euro, or 0.5 percent higher.
                                
 The crown has been on a steady decline since mid-July, with
the Czech central bank becoming the first in the region to
loosen policy on Aug. 7. 
                                
 Some central bankers had hinted one more cut was in the
cards, causing money market rates to fall, but the crown has now
lost 7.7 percent down from a July record high to the euro,
trimming expectations of more tightening.
                                
 On Tuesday, the 3X6 FRA <CZK3X6F=>, which shows where
investors expect three-month lending rates to be in three
months, added 6 basis points to 3.645 percent, after trading as
low as 3.405 percent in August, according to Reuters data.
                                
 "The curve now looks a little more reasonable," a local
trader said.
                                
 In Serbia, the dinar <EURRSD=> fell 0.2 percent to 76.37 per
euro after the country's central bank left its key interest rate
on hold at 15.75 percent, signalling borrowing costs would not
be loosened any time soon.
                                
 Elsewhere, Romania's leu <EURRON=> was steady at 3.517 per
euro, and the Croatian kuna <EURHRK=> was up 0.2 percent at
7.134 to the euro.
                                
 
========================Market Snapshot========================
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2008 
Czech crown      <EURCZK=>   24.710   24.840  +0.52%   +6.74%
Polish zloty     <EURPLN=>    3.350    3.346  -0.12%   +6.96%
Hungarian forint <EURHUF=>  237.660  238.050  +0.16%   +6.01%
Croatian kuna    <EURHRK=>    7.134    7.153  +0.27%   +2.63%
Romanian leu     <EURRON=>    3.517    3.518  +0.03%   +1.77%
Serbian dinar    <EURRSD=>   76.370   76.200  -0.22%   +3.03%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +8 basis points to  12bps over bmk*
5-yr T-bond   CZ5YT=RR   +2 basis points to  +17bps over bmk*
10-yr T-bond  CZ10YT=RR  +3 basis points to  +40bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -7 basis points to  +220bps over bmk*
5-yr T-bond   PL5YT=RR    -3 basis points to  +210bps over bmk*
10-yr T-bond  PL10YT=RR   -2 basis points to  +190bps over bmk*

Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +6 basis points to  +499bps over bmk*
5-yr T-bond   HU5YT=RR   +2 basis points to  +468bps over bmk*
10-yr T-bond  HU10YT=RR  +2 basis points to  +384bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1719 CET.
Currency percent change calculated from the daily domestic 
close at 1500 GMT.

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 (Reporting by Reuters bureaus, writing by Jason Hovet; editing
by Patrick Graham)