CEE MARKETS 3-FX firm; leu up in election runup, dinar hits low

                                
  (Updates throughout)
                                
 By Jason Hovet and Dagmara Leszkowicz
                                
 PRAGUE/WARSAW, Nov 28 (Reuters) - Emerging European
currencies mostly firmed versus the euro on Friday, with
Romania's leu rising almost 1 percent ahead of a general
election on Sunday, but the Serb dinar touched its lowest this
decade.
                                
 The leu <EURRON=> gained 1.1 percent to 3.77 per euro on
Friday, ahead of a parliamentary election with the outcome
uncertain and either winner likely to face challenges in
addressing risk from the global financial crisis [ID:nLR613106].
                                
 However, the leu has cut losses after a six-week low on
Thursday, which several dealers attributed to a covert central
bank intervention ahead of the elections. But others have said
the firming was a technical rebound from resistance levels.
                                
 "Sunday's election could have negative influence on the leu
... There is no clear majority, which means political
instability to say the least," said a trader with a foreign bank
in Bucharest.
                                
 The year-long credit crunch crept into central Europe last
month, raising concerns over countries like Romania that have
high current account deficits, while a slowing euro zone has
dented growth in the region's export-driven economies.
                                
 In Serbia, investors continued to flee the dinar <EURRSD=>,
which fell above 90 per euro to its weakest since the fall of
late autocrat Slobodan Milosevic in 2000 [ID:nLS64378].
                                
 The dinar later rebounded to 89.65 per euro after the
central bank intervened. The bank has sold around 600 million
euros since Oct. 1, but the currency has lost 16.7 percent in
that time.
                                
 
                                
 NEW PHASE
                                
 Central Europe's markets were hammered in October on rising
worries around some countries exposure to foreign credit,
sending countries like Hungary and Serbia to seek international
assistance.
                                
 Markets have since calmed, and analysts expect more
stability in the final month of the year after currencies firmed
this week. For the month, the forint is off 1.4 percent, while
the crown has lost 4.8 percent and the zloty 6.5 percent.
                                
 By 1510 GMT the zloty <EURPLN=> was 0.1 percent down against
the euro at 3.76, while Hungary's forint <EURHUF=> added 0.4
percent to 259.3 per euro, and the Czech crown <EURCZK=> slipped
0.5 percent to 25.32 per euro.
                                
 Focus has shifted to economic growth and most central banks
have begun easing monetary policy in response, with surprise
interest rate cuts in Hungary and Poland this week taken
positively by the market.
                                
 On Friday data showed Poland's third quarter economic
expansion was the slowest for three years and a sharp fall in
investment suggested even more sluggish growth in future
[ID:nLS448356].
                                
 "The data will support the monetary council in further quick
rate cuts," said Marta Petka-Zajagewska, an economist in
Raiffeisen Bank in Warsaw.
                                
 Bond yields in Poland slipped on Friday, as expectations for
further monetary easing come into play, while in Hungary dealers
said another cut is already factored in.
                                
 Stock markets in the region, which have stabilised and lent
weight to firmer currencies, were mixed on Friday, with Prague
<.PX> and Budapest's <.BUX> bourse in positive ground, while
Warsaw <.WIG> <.WIG20> slipped around 2 percent.
                                
 
----------------------MARKET SNAPSHOT-------------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2008 
Czech crown      <EURCZK=>   25.325   25.20   -0.5%    +4.42%
Polish zloty     <EURPLN=>    3.767    3.763  -0.11%   -4.62%
Hungarian forint <EURHUF=>  259.25   260.46   +0.46%   -2.53%
Croatian kuna    <EURHRK=>    7.126    7.144  +0.25%   +2.74%
Romanian leu     <EURRON=>    3.776    3.819  +1.13%   -5.47%
Serbian dinar    <EURRSD=>   89.655   89.116  -0.6%    -13.83%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR   +38 basis points to  193bps over bmk*
5-yr T-bond   CZ5YT=RR   +39 basis points to  +176bps over bmk*
10-yr T-bond   CZ9YT=RR   +13 basis points to  +120bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +10 basis points to  +377bps over bmk*
5-yr T-bond   PL5YT=RR   +2 basis points to  +314bps over bmk*
10-yr T-bond PL10YT=RR   +1 basis points to  +264bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond   HU3YT=RR   +22 basis points to  +875bps over bmk*
5-yr T-bond   HU5YT=RR   +16 basis points to  +814bps over bmk*
10-yr T-bond   HU10YT=RR +13 basis points to  +551bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1618 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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 (Reporting by Reuters bureaus; Writing by Jason Hovet and
Dagmara Leszkowicz; Editing by Victoria Main)