CEE MARKETS 4-FX rally pauses after U.S. banks report

                                
 * FX off intra-day highs as stocks drop gains
                                
 * IMF talk on euroisation in CEE helps FX in early trade
                                
 * Czech leaders seal new govt deal
                                
 * Poland plans to continue changing EU funds on market
                                
 
  (updates throughout, changes prices)
                                
 By Jason Hovet and Marius Zaharia
                                
 PRAGUE/BUCHAREST, April 6 (Reuters) -The Czech crown
surrendered its gains on Monday and dragged its peers lower
after a global rally in shares lost steam, overshadowing the
optimism triggered by Prague's deal for a new government.
                                
 U.S. markets opened lower on Monday [ID:nUEN004740] with the
banking sector under pressure after veteran analyst Mike Mayo of
Calyon initiated coverage of several U.S. banks with an
"underperform" or "sell" rating [ID:nL6685767].
                                
 This has cast clouds over a stream of news that has helped
regional assets, including an IMF document that recommended
struggling EU members should switch to the euro, even without
full euro zone membership. [ID:nL6497311]
                                
 "There is a slight risk aversion compared to the enthusiasm
in the morning as a reaction to a report from Mike Mayo, who has
a good reputation," one dealer said.
                                
 Meanwhile, political woes in the region seem to have reached
a turning point, with the Czech president giving green light to
a non-partisan government on Monday and Hungary's prime minister
designate winning key backing at the weekend. [ID:nL6598949]
                                
 By 1434 GMT, the crown <EURCZK=>, added 0.09 percent over
Friday's domestic close, Hungary's forint <EURHUF=> rose 0.4
percent, while the Polish zloty <EURPLN=> was flat.
                                
 Dealers in Hungary said the forint released some of the
gains also because the central bank warned of risks to banks'
liquidity and solvency positions. [ID:nL6710641]
                                
 Hungarian bonds firmed, with traders saying investors
anticipated recent government buybacks at wide spreads during
regular Wednesday auctions may continue.
                                
 
                                
 EUROISATION
                                
 The IMF paper said euroisation offered the largest benefits
in resolving foreign currency debt overhang, along with removing
uncertainty and boosting confidence.
                                
 Analysts said the paper, cited in the Financial Times, was
probably internal debate and not an official position.
                                
 They also said the recommendation may have been overtaken by
the G20's move last week to bolster IMF funds to quash any
concerns over emerging market economies' access to funding.
                                
 The region's currencies have dropped sharply since hitting
summer highs as worries over growth, financing and banks in
emerging Europe mount, with the zloty losing a quarter of its
value against the euro zone's currency since September. 
                                
 But the Polish currency has gained 8 percent since
mid-February, when the government said it would start changing
European Union funds on the currency market, a move which a
deputy finance minister said will continue. [ID:nL6395295]
                                
 On Monday, the Romanian leu <EURRON=> added 0.2 percent and
has gradually gained about 3.5 percent since the country secured
a 20 billion euro IMF-led aid package last month.
                                
 Poland also said it may be interested in tapping a newly
formed flexible credit line programme from the IMF but did not
need to do so at present [ID:nL6395295].
                                
 In Serbia, the central bank surprised with a 150 basis point
interest rate cut to 15 percent. The dinar <EURRSD=> gained 0.94
percent to bid at 93.237 per euro. [ID:nL6557032]
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  26.551   26.576  +0.09%    +0.76%
Polish zloty     <EURPLN=>   4.451    4.452  +0.02%    -7.55%
Hungarian forint <EURHUF=> 294.54   295.77   +0.42%   -10.52%
Croatian kuna    <EURHRK=>   7.425    7.417  -0.11%    -0.81%
Romanian leu     <EURRON=>   4.153    4.161  +0.19%    -3.34%
Serbian dinar    <EURRSD=>  93.237   94.117  +0.94%    -4.03%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +28 basis points to  173bps over bmk*
4-yr T-bond   CZ4YT=RR   +5 basis points to  +218bps over bmk*
8-yr T-bond   CZ8YT=RR    -14 basis points to  +200bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -8 basis points to  +393bps over bmk*
5-yr T-bond   PL5YT=RR    -5 basis points to  +347bps over bmk*
10-yr T-bond PL10YT=RR    -2 basis points to  +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -34 basis points to  +935bps over bmk*
5-yr T-bond   HU5YT=RR    -45 basis points to  +874bps over bmk*
10-yr T-bond   HU10YT=RR  -12 basis points to  +735bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1734 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news [EMRG]
Spot FX rates
Eastern Europe spot FX <EEFX=>    Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=>       Latin America spot FX <LATAMFX=>
Other news and reports  
World central bank news [CEN]  Economic Data Guide <ECONGUIDE> 
Official rates [GLOBAL/INT]  Emerging Diary [EMRG/DIARY] 
Top events [M/DIARY]  Diaries [DIARY] Diaries Index [IND/DIARY] 
 (Reporting by Reuters bureaus, writing by Jason Hovet/Marius
Zaharia; Editing by Victoria Main)