CEE MARKETS 3-Zloty leads gains in CEE as risk appetite up

                                
 * Zloty leads gains in CEE on better sentiment
                                
 * PMI indexes improving in Poland, Czech Republic
                                
 * FX still under pressure as downside risks remains
                                
 
  (Updates throughout)
                                
 By Dagmara Leszkowicz and Jason Hovet
                                
 WARSAW/PRAGUE, June 1 (Reuters) - Stronger appetite for risk
boosted the Polish zloty and Czech crown versus the euro on
Monday, with stock markets jumping and the U.S. dollar staying
weak.
                                
 Improving economic indicators for some of the region and
hopes the global economy will start to recover added to
sentiment, while more hawkish talk from Polish central bankers
also lift the zloty.
                                
 Significant monetary easing in Poland which has brought
interest rates to a historic low may not be needed any longer
because the economy could start to recover in a few months'
time, while inflation remains stubbornly high, two central
bankers signalled on Monday. [ID:nL1342661]
                                
 In Warsaw, the blue-chip index <.WIG20> jumped more than 6
percent along with Prague <.PX>.
                                
 The zloty <EURPLN=> shot 1.6 percent higher against the euro
to bid at 4.438, while the Czech crown <EURCZK=> was 1 percent
stronger against the single currency by late afternoon. 
                                
 "Risk appetite is starting to be felt more," said a London
trader. "More people are starting to feel a rally is taking hold
for real."
                                
 But the dealer add liquidity has remained low, which has
exaggerated price swings in recent months, keeping many on the
fence over central Europe's rally.
                                
 
                                
 FOR REAL?
                                
 Data Monday showed improving Polish PMI data, although it
was still below the 50 mark where growth starts, but inched up
in May. [ID:nLT366792].
                                
 The Czech PMI rose to a 7-month high but is still deep in
contraction territory. Analysts said it only showed the worst
has passed. [ID:nL1609885]
                                
 Dealers said the zloty was also buoyed by gross domestic
product (GDP) data on Friday showing the Polish economy still
growing in the first quarter, albeit marginally.
                                
 "It seems investors has finally noticed that Poland posted a
growth in the first quarter," said one Warsaw-based dealer.
                                
 Romania's leu <EURRON=> edged up 0.1 percent. In Hungary,
which is closed for holiday, the forint <EURHUF=> rose 1.5
percent.
                                
 Polish bonds also strengthened with the currency, but Czech
bonds were little changed despite data showing the budget
widening to almost twice what the government planned last year.
[ID:nL17736]
                                
 Emerging European currencies have swung widely in 2009,
rebounding strongly since February and March lows before
settling into still somewhat wide ranges in the past month. The
forint is up 3 percent since May 15, while the crown and zloty
has added 1 percent in that time.
                                
 Lagging effects in the economic downturn, like sharply
higher budget deficits and rising bad loans due to higher
joblessness, will keep downside pressures on currencies, dealers
and strategists say.
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.68    26.935  +0.96%   +0.27%
Polish zloty     <EURPLN=>    4.438    4.51   +1.62%   -7.28%
Hungarian forint <EURHUF=>  279.25   283.5    +1.52%   -5.62%
Croatian kuna    <EURHRK=>    7.34     7.356  +0.22%   +0.34%
Romanian leu     <EURRON=>    4.182    4.185  +0.07%   -4.01%
Serbian dinar    <EURRSD=>   93.953   94.757  +0.86%   -4.76%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR    -5 basis points to  149bps over bmk*
4-yr T-bond   CZ4YT=RR    -4 basis points to  +153bps over bmk*
8-yr T-bond   CZ8YT=RR    -4 basis points to  +262bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR    -5 basis points to  +399bps over bmk*
5-yr T-bond   PL5YT=RR    -8 basis points to  +305bps over bmk*
10-yr T-bond PL10YT=RR    -11 basis points to  +261bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1645 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
and Jason Hovet; Editing by Ruth Pitchford)