* PLN in 12 mths seen firmer vs EUR at 3.85 (pvs fcast 3.9)
* Crown seen firming to 25/euro (unchanged from pvs)
* Forint seen strengthening to 264/euro (pvs 266)
* Leu seen gaining to 4.15/euro (pvs 4.1)
By Sandor Peto
BUDAPEST, Nov 3 (Reuters) - Central Europe's main currencies
will extend gains in the next 12 months, led by Poland's zloty
<EURPLN=>, despite a retreat in the region's markets since last
week, a Reuters poll of analysts showed on Tuesday.
Battered by crisis, the Polish, Romanian, Hungarian, and
Czech currencies are still far below record highs hit last year.
All face risks due to budget deficits and the forint, crown
and leu also risk short-term weakening as central banks combat
weak inflation and political uncertainty complicates reform
efforts.
However, the zloty, which fell on Monday to close domestic
trade at 4.268 versus the euro, is expected to firm to 3.85 in a
year's time -- compared with a forecast of 3.9 a month ago -- an
11 percent gain from Monday's domestic close.
The Czech crown<EURCZK=> is expected to firm 5-6 percent to
25.00 against the euro, Hungary's forint<EURHUF=> 4-5 percent to
264 and Romania's leu<EURRON=> 5 percent to 4.15.
"We are optimistic over the region's currencies, though the
extent is differentiated," said Ulrich Leuchtmann, head of
currency research at Commerzbank in Frankfurt.
"There has been a global rise in risk aversion ... but it
will abate in the future, and the region's currencies are still
not at the levels where they were before the crisis."
The units rebounded in the past few months, but the zloty
has still shed 25 percent since its peaks in the summer of 2008,
the leu 19 percent, the forint 18 and the crown 13 percent.
Late last month they fell to multi-month lows as uncertainty
over the global recovery stoked risk aversion.
Concerns over ballooning state budget deficits in the Czech
Republic and Poland -- as well as political turmoil that has
brought down governments in Prague, Bucharest and Budapest this
year -- have also weighed.
The median forecasts of 42 analysts in the poll, conducted
on Oct. 29-Nov. 2, show exchange rates weaker by 1 or 2 percent
for the next few months than levels predicted a month ago.
Last week the units fell almost in tandem.
"If the negative correction continues ... it will likely hit
all currencies in the region and it is unlikely that there will
be any safe havens," said Danske Bank in its weekly regional
note.
ZLOTY, CROWN SEEN LEADING
But the gloom is expected to pass.
Investors are seen favouring the assets of states with
better fundamentals -- partly because the prospect that their
central banks will raise interest rates, reversing cuts
delivered in the past year, makes those currencies more
attractive.
Poland, helped by the region's biggest internal market, is
seen as a standout. It is the only European Union state to have
avoided contraction and is expected to recover quickly.
Even though an overshoot of budget deficit targets next year
remains a risk, the zloty is seen firming 4 percent over the
next three months to 4.1 per euro, according to the poll.
The central banks of both Poland and the Czech Republic are
expected to launch monetary tightening next year, from all-time
official interest rate lows of 3.5 and 1.25 percent.
But for the crown, some analysts do not rule out one more
rate cut [] and the Czech central bank has signalled
a strong crown could cause protracted deflation, a signal it
will avoid policy that would let the unit firm quickly.
Benchmark rates are 7.0 percent in Hungary and 8.0 percent
in Romania, and both banks are still in easing cycles, eyeing
deep recession and weak domestic demand.
The latter economies have been more exposed to foreign
financing, had to resort to aid from the International Monetary
Fund, and are expected to recover more slowly.
Romania's short-term prospects are also clouded by a
government crisis. []
Hungary's central bank, like the Czechs, probably does not
mind some forint weakness if it is not excessive. Its inflation
report to be published late this month is expected to show an
undershoot of the 3 percent goal in 2010, analysts said.
It has cut rates by 4.5 percentage points over the past
year.
"I don't expect the forint retreat to lead to a halt in rate
cuts, but the bank's rate cut steps may become smaller, 25 basis
point rather than 50," said Gyorgy Barta of CIB in Budapest.
"The size of the next cut ... will depend on the forint."
For data please click on <CEEFXPOLL01>
For more analyst comments []
For latest polls on major currencies <FOREXPOLL01>
(Reporting by Sandor Peto; Editing by Ruth Pitchford)
