CEE MARKETS 2-FX hits new lows on increased risk aversion

                                
 (adds detail, quotes, fixed income)
                                
 By Marius Zaharia
                                
 BUCHAREST, Feb 16 (Reuters) - The Polish zloty fell to its
weakest level since European Union entry in May 2004 and the
Czech crown touched a three-year low against the euro on Monday
as bleak Japanese data added to the grim regional outlook.
                                
 Japan's economy, the world's second-largest, is facing its
worst quarterly contraction in 35 years [ID:nSP423312] and the
data weakened Asian currencies overnight and enhanced risk
aversion.
                                
 The news from Japan added to poor euro zone and regional GDP
data on Friday, which showed a darker outlook for emerging
Europe's economies [ID:nLD1361].
                                
 By 1006 GMT, the Polish zloty <EURPLN=> weakened by almost 3
percent to 4.772 per euro, the Hungarian forint <EURHUF=> fell
1.7 percent to 302.32 per euro, the Czech crown <EURCZK=>
dropped 1.8 percent to 29.121 per euro and Romania's leu
<EURRON=> fell 0.3 percent.
                                
 "GDP data in Japan is weakening the region today," said one
dealer with a foreign bank in Bucharest. "A G7 meeting over the
weekend did not help too much either."
                                
 Earlier in the session, the zloty hit a low of 4.7913 per
euro, its lowest since mid-2004 and the crown hit a three-year
low of 29.209 per euro. Romania's leu was less hit, as it still
benefited from a Moody's announcement on Friday that the ratings
agencies would keep its stable outlook for now.
                                
 "(There) is still very high risk aversion," one Warsaw-based
dealer said. "Besides options story affects the currency."
                                
 Poland is looking to scrap some currency options that have
tripped up exporters betting the wrong way on the zloty,
exposing them to losses of billions of euros [ID:nLA326949].
                                
 Tumbling economic growth has forced central banks to cut
interest rates, adding more pressure on the currencies.
                                
 However, weak exchange rates threaten to revive inflation
and could destabilise financial systems and many analysts now
think monetary easing could be paused in some countries.
                                
 In Czech Republic, the Czech finance ministry plans an
economic stimulus package of 73 billion Czech crown to mitigate
the impact of the global financial crisis [ID:nPRA002374].
                                
 Czech bond yields ticked higher on the short end, flattening
the curve slightly, but showed little reaction to the plans.
                                
 "This news has been already priced in, I think; there has
already been talks about the amount of spending," said a Prague
bond dealer. "There is still a question if a stimulus package is
the right thing since we are so dependent on exports."
                                
 Polish bonds were little changed, but zloty's weakness moved
the Hungarian market, where yields were up over 20 basis points.
                                
 "What looks very ugly is the Polish zloty," one fixed income
in Budapest said. "Whatever is happening in the market now is
not country-specific, it is driven by the zloty's fall."
                                
 "It pushed the forint down to 303 against the euro, which is
relatively less bad (than the zloty's fall), but now doubts
emerge whether the central bank will be able to cut interest
rates in the next two months," he said.
 ----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>  29.121   28.594   -1.81%    -8.13%
Polish zloty     <EURPLN=>   4.772    4.632   -2.93%   -13.77%
Hungarian forint <EURHUF=> 302.32   297.06    -1.74%   -12.82%
Croatian kuna    <EURHRK=>   7.432    7.43    -0.03%    -0.9%
Romanian leu     <EURRON=>   4.299    4.287   -0.28%    -6.62%
Serbian dinar    <EURRSD=>  93.589   93.569   -0.02%    -4.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -3 basis points to  124bps over bmk*
4-yr T-bond   CZ4YT=RR    -26 basis points to  +137bps over bmk*
8-yr T-bond   CZ8YT=RR   +5 basis points to  +150bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +10 basis points to  +414bps over bmk*
5-yr T-bond   PL5YT=RR   +9 basis points to  +341bps over bmk*
10-yr T-bond PL10YT=RR   +5 basis points to  +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +35 basis points to  +995bps over bmk*
5-yr T-bond   HU5YT=RR   +29 basis points to  +882bps over bmk*
10-yr T-bond   HU10YT=RR +28 basis points to  +712bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1206 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;
Editing by Andy Bruce)