CEE MARKETS 2-Polish zloty leads FX lower, flu adds to concerns

                                
 * Polish zloty leads losses as euro chances receding
                                
 * Investors worried about swine flu
                                
 * Czech Republic plans long 5-year euro bond
                                
 
  (adds detail, quote, fixed income)
                                
 By Jason Hovet and Marius Zaharia
                                
 PRAGUE/BUCHAREST, April 28 (Reuters) - The Polish zloty led
emerging European currencies lower on Tuesday due to fresh
doubts over the country's euro entry goal, while investors shied
away from risk on worries over a global swine flu outbreak.
                                
 Investors stayed cautious as governments around the world
took steps to mitigate the spread of a flu virus that has killed
up to 149 in Mexico, and has shown up in the United States,
Canada and Europe. [ID:nN27476506]
                                
 An outbreak threatened to add to a global slowdown, hitting
central Europe's export-driven economies, which have already
buckled under a drop in demand for their cars, televisions and
other goods in the west.
                                
 In Poland, following a higher than forecast 2008 budget
deficit, the government approved an updated euro plan without
revising its 2012 target date, but conceded that a sharp
economic downturn may hamper it [ID:nLR669471] .
                                
 "The investors have understood that it's no rose garden down
here," said a Warsaw-based trader. "It now seems we don't meet
... Maastricht criteria and one can see that ERM2 entry won't
come now but in some time."
 Poland also struggles to meet the inflation criteria and
some analysts fear long-term interest rates will not remain
below required levels and needs to find political consensus to
lower risks of a speculative attack on the zloty [ID:nLR282949].
                                
 The zloty <EURPLN=> slipped 1 percent from Monday's domestic
close, bidding at 4.576 to the euro by 0953 GMT. The Hungarian
forint <EURHUF=> was 0.8 percent weaker to 297.15 per euro and
the Czech crown <EURCZK=> dropped 0.5 percent to 26.806 pe euro.
                                
 The zloty, down nearly 30 percent from its all-time highs
against the euro last summer, lost 2 percent on Monday on a mix
of fading euro hopes and signs of Poland's deepening slowdown,
as shown by the retail sales and jobless data [ID:nLR184111].
                                
 In Hungary, the three-month rolling unemployment rate rose
to 9.7 percent in January-March from 9.1 percent in
December-February. [ID:nBUD002923]
                                
 In Romania, which expects a first tranche of IMF-led
financial aid next month, the leu <EURRON=> inched down 0.6
percent at 4.234 per euro.
                                
 Analysts expect nearly all of the region's economies to
slide into recession this year due to falling demand for their
goods from western markets. On top of this, investors fear a
swine flu outbreak can prolong pain by hitting tourism, farmers
and insurers.
                                
 "Swine flu fears dent confidence," UniCredit analysts said
in a morning note. "Until there is more clarity, markets will
continue to focus on swine flu newsflow."
                                
 In debt markets, Polish bonds remained virtually flat, while
the Czech Republic launched the sale of a 5.5 year euro
benchmark bond on Tuesday [ID:nLS792693]. Hungary sold 40
billion forints worth of three-month T-bills. [ID:nBUD002924]
                                
 Sentiment for central European debt has improved since March
due to rebounding global stocks and International Monetary Fund
pledges to make emerging market funds available.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  26.806   26.666   -0.52%    -0.2%
Polish zloty     <EURPLN=>   4.576    4.532   -0.96%   -10.07%
Hungarian forint <EURHUF=> 297.15   294.78    -0.8%    -11.31%
Croatian kuna    <EURHRK=>   7.437    7.435   -0.03%    -0.97%
Romanian leu     <EURRON=>   4.234    4.208   -0.61%    -5.19%
Serbian dinar    <EURRSD=>  94.635   95.53    +0.95%    -5.45%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -6 basis points to  179bps over bmk*
4-yr T-bond   CZ4YT=RR   +8 basis points to  +207bps over bmk*
8-yr T-bond   CZ8YT=RR   +5 basis points to  +298bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +4 basis points to  +413bps over bmk*
5-yr T-bond   PL5YT=RR   +4 basis points to  +351bps over bmk*
10-yr T-bond PL10YT=RR   +1 basis points to  +306bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +36 basis points to  +905bps over bmk*
5-yr T-bond   HU5YT=RR   +34 basis points to  +851bps over bmk*
10-yr T-bond   HU10YT=RR +33 basis points to  +757bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1253 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/Marius
Zaharia; Editing by Victoria Main)