* Yuan news drives zloty to 1-month high, other FX up
* Romania sells a quarter of planned bills at tender
* Hungary central bank keeps rates on hold as expected
(Adds Romania tender, Hungary rate decision)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, June 21 (Reuters) - Poland's zloty jumped to one-month highs on Monday to lead gains in central European assets after China allowed the yuan to firm, while Romania cut its debt offering because upward yield pressure remained high.
The yuan rose to its strongest since July 2005, giving a boost to risk appetite that analysts said would help kick-start more appreciation in central Europe. []
The region has struggled to shake off worries over the euro zone's debt crisis spreading, despite lower debt and better growth prospects, but volatility has dropped slightly in the past week, raising asset prices.
Debt tenders, though, have stayed under pressure from rising yields, and Romania sold roughly a quarter of what it planned at a one-year T-bill tender on Monday.
Many of the ministry's auctions have failed or fallen short since May 6, around when Romania announced an austerity plan to meet conditions of its IMF loan. The average yield jumped 56 basis points to 6.85 percent on Monday: investors are wary planned fiscal cuts may not go as planned [].
Analysts said the ministry's signalled strategy of only accepting yields below 7 percent was a risk and it may be forced to pay higher yields in the future as funding needs pile up.
"I don't think they will manage to sell more at these levels even if the IMF tranche is disbursed, because this is not only a domestic issue," a trader said. "There are sovereign woes all across Europe."
Hungary left interest rates at a record low of 5.25 percent as expected on Monday. []
By 1233 GMT, stock markets had risen up to 2.5 percent led by Bucharest <>, and the Thomson Reuters Equity Emerging Markets Europe Index <.TRXFLDEETU> had gained 0.8 percent.
The Hungarian forint <EURHUF=> rose 0.3 percent to bid at 278.27 per euro, around its highest since June 3. The forint's strength lifted bond prices, pushing yields down 7-20 basis points.
Romania's leu <EURRON=> edged up and the Czech crown <EURCZK=>, the region's top performer this year, was flat.
In Poland, acting president Bronislaw Komorowski won a first round of a presidential ballot on Sunday, but faces a tight runoff vote against Jaroslaw Kaczynski, twin brother of the former president killed in a plane crash in April.
A Komorowski win in a July 4 runoff will likely be cheered by markets, because investors fear Kaczynski may use his right to veto to block fiscal reforms. []
The likely tight result pushed bond yields up 3-6 basis points, but the zloty <EURPLN=> jumped half-a-percent, leading regional gains triggered by yuan's rise.
EXPORT BOOST?
Analysts said China's decision could help growth in export-heavy emerging European countries, which are part of the supply chain for euro zone states whose goods will become cheaper in Asia because of the stronger yuan.
"The outlook still depends on recovery in western Europe and central banks in the region. We see gradual appreciation (to the end of the year) of these currencies, but at a slow pace," said Ulrich Leuchtmann, head of FX research at Commerzbank, who doubted the yuan news would have much of a lasting effect.
Societe Generale's emerging market strategist Murat Toprak said declining volatility will lead to short-covering that will benefit the region.
He targets the zloty at 3.95 to the euro and the forint at 270 per euro in two to three weeks.
The zloty and Czech crown are seen by analysts as posting the biggest gains going into next year with their economies leading an export-driven regional recovery. []
A Reuters poll on June 3 forecast the crown at 25 per euro in six months, and the zloty at 3.81, 2.9 percent and 5.8 percent above current levels. <CEEFXPOLL01> --------------------------MARKET SNAPSHOT-------------------- Currency Latest Previous Local Local
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today in 2010 Czech crown <EURCZK=> 25.752 25.737 -0.06% +2.2% Polish zloty <EURPLN=> 4.036 4.054 +0.45% +1.68% Hungarian forint <EURHUF=> 278.37 279.29 +0.33% -2.88% Croatian kuna <EURHRK=> 7.197 7.2 +0.04% +1.56% Romanian leu <EURRON=> 4.231 4.24 +0.21% +0.15% Serbian dinar <EURRSD=> 103.51 103.527 +0.02% -7.37% Yield Spreads Czech treasury bonds <0#CZBMK=> 2-yr T-bond CZ2YT=RR 0 basis points to 153bps over bmk* 7-yr T-bond CZ7YT=RR -1 basis points to +162bps over bmk* 10-yr T-bond CZ9YT=RR 0 basis points to +152bps over bmk* Polish treasury bonds <0#PLBMK=> 2-yr T-bond PL2YT=RR +1 basis points to +409bps over bmk* 5-yr T-bond PL5YT=RR +2 basis points to +371bps over bmk* 10-yr T-bond PL10YT=RR -2 basis points to +310bps over bmk* Hungarian treasury bonds <0#HUBMK=> 3-yr T-bond HU3YT=RR -19 basis points to +614bps over bmk* 5-yr T-bond HU5YT=RR -11 basis points to +558bps over bmk* 10-yr T-bond HU10YT=RR -7 basis points to +478bps over bmk* *Benchmark is German bond equivalent. All data taken from Reuters at 1533 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 [] 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 [] Economic Data Guide <ECONGUIDE> Official rates [] Emerging Diary [] Top events [] Diaries [] Diaries Index [] (Reporting by Reuters bureaus, writing by Jason Hovet and Marius Zaharia; Editing by Ruth Pitchford)
