CEE MARKETS 3-Currencies trim losses but remain under pressure

(Adds quote, updates prices)

* Euro zone meeting, debate of possible Spain bailout watched

* Hungary's forint gives back some of Friday gains

* Romanian leu hits 2-month low, market eyes central bank

By Sam Cage and Jana Mlcochova

BUCHAREST/PRAGUE, Oct 8 (Reuters) - Emerging European currencies trimmedsome of the morning's losses on Monday, as investors showed willingness to takeon risk, but stayed under pressure before a euro zone ministerial meeting wherea potential bailout of Spain may be debated.

Dealers said investors were prepared to seek out higher returns throughemerging markets after the European Central Bank (ECB) said it could buy bondsto support struggling euro zone members and the U.S. Federal Reserve last monthannounced a third round of quantitative easing.

This meant, for example, that the Czech crown could quickly recover some ofits losses once a Japanese bank, which sold the currency early in the day,ceased to do so.

"We can expect a changeable mood regarding the euro due to the upcomingsummit but overall the situation plays in favour of emerging markets, mainlyafter promises of action by the ECB and the Fed boosted risk appetite andinvestors seek higher yields," a Prague-based dealer said.

Hungary's forint

pared some of its early losses to trade at 283.81per euro by 1313 GMT, or 0.45 percent down on the day. It had earlier weakenedas much as 0.7 percent on the day to 284.55.

The unit had led emerging European currencies lower on Monday, giving backsome of the previous session's sharp gains, due to persistent questions over aninternational financing deal for Hungary.

A trader said that in line with the forint's easing today, bond yields alsoedged a few basis points higher, after a significant drop on Friday.

Budapest scrapped a disputed tax on its central bank and unveiled a swatheof new measures on Friday to keep its deficit under control, removing anobstacle to an International Monetary Fund (IMF) deal and sending the forint upmore than 1 percent.

"No wonder we are at these levels now, it's a correction," a dealer said."If we look at monetary policy, what we are having is a rate-cut cycle, andthere is still uncertainty over the IMF deal. That story is not over yet."

The cost of insuring Hungary's debt against a default for five years

sank to around 340 basis points, its lowest level since August2011, but markets will remain on edge until a deal is actually signed.

"A fault confessed is half redressed," Commerzbank said in a note. "Untilthe EU and IMF give the all clear, risk continues to concentrate on the upperend in EUR-HUF (euro forint)."

Elsewhere, assets were pressured by a bearish mood on global stock marketsafter the World Bank cut growth forecasts for Asia and underlined concerns overthe global economic outlook.

The euro came under pressure ahead of a meeting on Monday of euro zonefinance ministers as the bloc's permanent bailout fund is launched. Spain wasexpected to top the agenda at the gathering in Luxembourg as uncertaintypersists over when the country may ask for a bailout.

Stocks fell across central Europe, led by a 0.9 percent drop in Budapest

.The Czech crown

also pared losses, trading 0.3 percent weaker onthe day by 1320 GMT after weakening as much as 0.5 percent earlier. Data showeda bigger-than-expected fall in industrial output and raised expectations of afourth straight quarter of recession.

"The data published today can hardly be interpreted as good news for theCzech crown," said Raromir Jac, analyst at Generali PPF Asset Management.

Dealers said they saw Bank of Tokyo Mitsubishi selling the unit early in themorning and once this stopped, the crown rose off its lows.

LEU LOWSRomania's leu

hit a new two-month low before regaining some groundto trade broadly flat at 4.572 per euro, as traders tested the level at whichthe central bank would step in to support the currency.

The leu is at its lowest since the summer, when it hit all-time lows onpolitical uncertainty caused by a failed attempt by the government to remove thepresident from office, which also raised doubts over Romania's 5 billion euroIMF backstop deal.

A parliamentary election is due in December and campaigning and post-votebargaining could again raise doubts over the country's adherence to itsinternational commitments.

"Fears of central bank intervention may have subsided," said ING economistMihai Tantaru. "It could soften further, eyeing 4.60 per euro in a matter ofdays."

Poland's zloty

fell 0.3 percent, with markets weighing theprospect of monetary policy easing after a central banker said he may vote foran interest rate cut in November.

--------------------------MARKET SNAPSHOT--------------------

Currency Latest Previous Local Localclose currency currencychange changetoday in 2012Czech crown

24.936 24.826 -0.44% +2.44%

Polish zloty

4.077 4.067 -0.25% +9.51%

Hungarian forint

283.4 282.3 -0.39% +11.01%

Croatian kuna7.478 7.478 0% +0.51%Romanian leu

4.567 4.566 -0.02% -5.39%

Serbian dinar114.71 114.87 +0.14% -6.76%Yield SpreadsCzech treasury bonds2-yr T-bond CZ2YT=RR +4 basis points to 47bps over bmk*7-yr T-bond CZ6YT=RR +4 basis points to +77bps over bmk*10-yr T-bond CZ10YT=RR +2 basis points to +88bps over bmk*Polish treasury bonds

2-yr T-bond PL2YT=RR +2 basis points to +397bps over bmk*

5-yr T-bond PL5YT=RR +3 basis points to +363bps over bmk*

10-yr T-bond PL10YT=RR +3 basis points to +317bps over bmk*

Hungarian treasury bonds3-yr T-bond HU3YT=RR +9 basis points to +641bps over bmk*5-yr T-bond HU5YT=RR +12 basis points to +611bps over bmk*

10-yr T-bond HU10YT=RR +4 basis points to +567bps over bmk*

*Benchmark is German bond equivalent.

All data taken from Reuters at 1553 CET.

Currency percent change calculated from the daily domestic

close at 1600 GMT.

(Editing by Catherine Evans and Anthony Barker)

((sam.cage@thomsonreuters.com)(+40 0 21 305 5266)(Reuters Messaging:sam.cage.thomsonreuters.com@reuters.net))