CEE MARKETS 3-FX erase gains, zloty seen firming

                                
 * FX pare intraday gains
                                
 * Czech trade shows surplus, Hungary's industry down y/y
                                
 * Polish fin minister expects zloty to gain
                                
 
  (Updates prices, adds new comments)
                                
 By Marius Zaharia and Gergely Szakacs
                                
 BUCHAREST/BUDAPEST, July 7 (Reuters) - Central European
currencies reversed earlier gains and were flat or a shade
weaker late on Tuesday, but remained below key technical levels
approached after a correction to last week's rally.
 The Czech crown <EURCZK=>, the region's best performing unit
for the year, shed 0.03 percent
                                
 Dealers said sentiment on the crown was hurt by news that
the 2009 budget deficit could hit around 5 percent of GDP
following a wave of floods that have killed at least 13 people
and caused widespread damage to firms and houses. [ID:nL5671444]
                                
  "The crown got a negative impulse from the unceasing floods,
which will draw 7 to 10 billion crowns from the state coffers,
according to the official estimate," said David Sykora, a dealer
from CSOB.
                                
 The Czech Republic posted a marginally higher-than-expected
May trade surplus but showed both exports and imports continuing
to plunge by more than 20 percent, highlighting the depth of the
economic downturn [ID:nL7460725].
                                
 Currencies hit multi-month highs last week during a rally
driven by encouraging regional data and an overall improvement
in global sentiment, but they suffered a correction on Monday as
the region's bourses fell.
                                
 A Reuters poll showed last week the region's major
currencies were still expected to weaken in the short-term, but
were seen firming over a 12-month period with the zloty leading
gains [ID:nL2228966].
                                
 On Tuesday the zloty <EURPLN=>, eased slightly despite the
finance minister saying he expected the currency to gradually
strengthen for the rest of 2009 after it shed a large chunk of
its value against major currencies late last year
[ID:nWAR008517].
                                
 ING bank recommended on Tuesday to sell leu/zloty six-month
forward contracts, as it expects the Romanian economy to shrink
further, and said the zloty was still cheap in comparison to
Poland's better fundamentals. [ID:nL7631883]
                                
 Hungary's forint <EURHUF=> was up by 0.2 percent after data
showing that industrial output fell more than the market
consensus on the year, but the overall figure still showed an
improvement versus the previous month [ID:nL7687288].
                                
 The forint was also supported by a successful bill auction,
which was heavily oversubscribed earlier in the day,
[ID:nBUD003045] reflecting rising appetite for debt in Hungary,
which secured a $25.1 billion IMF-led loan last year to stave
off collapse.
                                
 But dealers said the fixed income market would likely remain
muted ahead of inflation data next week and an interest rate
decision later this month, where markets increasingly expect a
cut after five successive months of steady rates at 9.5 percent.
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   25.943    25.936   -0.03%   +3.12%
Polish zloty     <EURPLN=>   4.391    4.386   -0.11%    -6.29%
Hungarian forint <EURHUF=>   273.85    274.5  +0.24%    -3.76%
Croatian kuna    <EURHRK=>   7.334    7.32   -0.19%   +0.42%
Romanian leu     <EURRON=>   4.209    4.203   -0.14%    -4.62%
Serbian dinar    <EURRSD=>   92.36    93.163  +0.87%    -3.12%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +24 basis points to  164bps over bmk*
4-yr T-bond   CZ4YT=RR    -11 basis points to  +180bps over bmk*
8-yr T-bond   CZ8YT=RR   +8 basis points to  +312bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -5 basis points to  +395bps over bmk*
5-yr T-bond   PL5YT=RR    -1 basis points to  +334bps over bmk*
10-yr T-bond PL10YT=RR    -4 basis points to  +298bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR    -25 basis points to  +778bps over bmk*
5-yr T-bond   HU5YT=RR    -59 basis points to  +696bps over bmk*
10-yr T-bond   HU10YT=RR  -50 basis points to  +598bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1608 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus, writing by Marius Zaharia and
Gergely Szakacs; Editing by Victoria Main)