CEE MARKETS 2-FX fall after stocks rally reverses

                                
 * Forint leads losses after stocks rally ends
                                
 * Czech govt agreement seen in doubt
                                
 * Hungary output falls sharply
                                
 * Bond prices down, tracking currencies
                                
 
  (Adds fixed income, details)
                                
 By Dagmara Leszkowicz
                                
 WARSAW, April 7 (Reuters) - The Polish zloty led losses in
central Europe on Tuesday, as currencies pulled back from recent
gains after a rally in stocks lost steam.
                                
 In Hungary, the forint extended falls after data showed a
sharp drop in industrial output in February [ID:nL7340126],
while investors were also eyeing a Czech interim government
agreement that still looked shaky.
                                
 The leader of the main Czech opposition Social Democrats,
Jiri Paroubek, said on Tuesday he saw no reason for the collapse
of a deal on an interim government that would lead the country
to early elections in the autumn, despite two smaller parties
backing away from the plan late on Monday.[ID:nPRA002490]
                                
 At 1109 GMT Hungary's forint <EURHUF=> was off 1.4 percent
at 297.7 against the euro, while the Polish zloty <EURPLN=>
dropped 1.5 percent down against the euro to 4.486.
                                
 The Czech crown <EURCZK=> dipped from Monday's domestic
close to 26.59 per euro, and Romania's leu <EURRON=> slipped 0.2
percent but was still near three-month highs hit in the past
week since the country secured an external aid package.
                                
 "I expect this is a regular correction as currencies in the
region are following the weaker euro to the dollar," said one
Warsaw-based dealer.
                                
 Stock indices in the region lost 1-2 percent, while Polish
bonds tracked the currency down as investors waited for a
longer-maturity bond tender on Wednesday. [ID:nWAR008148]
                                
 Pressure on Czech bonds would remain due to growing supply
and worries that political horsetrading will undermine efforts
to cap spending, dealers said.
                                
 "The longer the (political) process, the more the budget
deficit outlook deteriorates," Komercni Banka dealers said in a
note. "Political consensus for more fiscal impulses now seem to
have very weak opposition, if any."
                                
 
                                
 TEMPORARY RELIEF
                                
 Currencies have strengthened from multi-year lows in the
past month as investors' appetite for riskier emerging assets
grew on hopes the world economy is stabilising. But banking
stocks have come under renewed pressure after a sector downgrade
from a prominent analyst on Monday.
                                
 Dealers and analysts said the more positive tone was still
likely to dominate going forward, even though some currencies
were unable to defend gains made after the G20 summit last week
pledged more funds for emerging economies. 
                                
 Analysts also expect fundamental pressures to remain.
                                
 "We assume that the improved sentiment created by the summit
is not just a temporary phenomenon even though it is obvious
that not all difficulties have been overcome yet," Commerzbank
analysts wrote in a morning note.
                                
 
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.59    26.532  -0.22%    +0.61%
Polish zloty     <EURPLN=>    4.486    4.419  -1.49%    -8.27%
Hungarian forint <EURHUF=>  297.7    293.54   -1.4%    -11.47%
Croatian kuna    <EURHRK=>    7.425    7.43   +0.07%    -0.81%
Romanian leu     <EURRON=>    4.162    4.156  -0.14%    -3.55%
Serbian dinar    <EURRSD=>   93.227   93.54   +0.34%    -4.02%

Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -1 basis points to  211bps over bmk*
4-yr T-bond   CZ4YT=RR    -8 basis points to  +239bps over bmk*
8-yr T-bond   CZ8YT=RR    +7 basis points to  +309bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -8 basis points to  +394bps over bmk*
5-yr T-bond   PL5YT=RR     0 basis points to  +350bps over bmk*
10-yr T-bond PL10YT=RR    -1 basis points to  +302bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   -21 basis points to  +972bps over bmk*
5-yr T-bond   HU5YT=RR   -58 basis points to  +1004bps over bmk*
10-yr T-bond   HU10YT=RR -47 basis points to  +769bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1210 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
                                
 
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 (Reporting by Reuters bureaus, writing by Dagmara
Leszkowicz; editing by Patrick Graham)