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CEE MARKETS-Leu bucks FX easing, Romanian central bank seen holding fire

* Leu rebound halts ahead of central bank meeting

* Romanian central bank is seen keeping rates on hold

* Crown eases, Czech PM reverses decision to resign

BUDAPEST, May 5 (Reuters) - The leu, bucking an easing of other Central European currencies, drifted sideways on Friday ahead of a meeting of the Romanian central bank, which is expected to keep interest rates on hold at record lows. Investors held their breath ahead of U.S. payroll figures due at 1230 GMT, which could influence the closely-watched euro/dollar cross. The leu traded at 4.546 against the euro, not extending its rebound from Wednesday's one-month lows at 4.5525. Romanian senators on Thursday cancelled a plan to include corruption offences in prison pardons. This was the second time this year that planned legislation to ease rules on corruption was withdrawn after street protests. Another worry for investors is that the leftist government's drive to boost wages further could lift the budget deficit above the European Union's ceiling, 3 percent of economic output. Analysts' consensus forecast for 1.7 percent inflation at the end of the year is in line with the central bank's projection, but the price index could rise further next year.

Some analysts expect the Romanian central bank to start to lift its interest rates before the end of the year, but on Friday no change is expected in its interest rates or rhetoric. "Deficit worries are likely to accentuate as we progress into the year, negatively affecting the EURRON and Romania's financing costs," UniCredit analysts said in a note. "The EURRON seems to have transitioned to the new (weaker) 4.50-4.60 range since the beginning of 2017," they said. A rise in inflation across Central Europe since late 2016 is unlikely to trigger monetary policy tightening soon. The Czech central bank (CNB), however, signalled on Thursday that it may need to lift rates if the crown does not firm from 27 against the euro, the level of a cap on the currency, which the bank removed a month ago. "(Market interest) rates corrected down a bit after the CNB press conference, however bids returned quickly as the threat of the hike seems serious enough to start getting priced in..." one Prague-based trader said. The crown eased in tandem with the forint and the zloty, shedding 0.1 percent to 26.82. Investors have ignored the twists and turns of a Czech government crisis months before October elections, which the trader called "politics silly game". Prime Minister Bohuslav Sobotka on Friday reversed his decision to resign, saying he would instead seek the removal of Finance Minister Andrej Babis, his main political rival.

Elsewhere, the stocks of Polish gas company PGNiG plunged 5.6 percent in a sharp correction after hitting 18-month highs on Thursday when Warsaw's blue-chip stock index reached a 23-month high.

CEE SNAPS AT 1052 MARKETS HOT CET

CURRENCIES Lates Previ Daily Chang

t ous e bid close chang in e 2017 Czech 26.82 26.80 -0.07 0.69% crown 10 20 % Hungary 312.2 312.0 -0.05 -1.09 forint 100 400 % % Polish 4.219 4.214 -0.11 4.38% zloty 0 3 % Romanian 4.546 4.547 +0.0 -0.24 leu 0 3 3% % Croatian 7.430 7.436 +0.0 1.68% kuna 0 5 9% Serbian 123.1 123.2 +0.1 0.20% dinar 000 250 0% Note: calculate previ close 1800 daily d from ous at CET

change STOCK S Lates Previ Daily Chang

t ous e

close chang in

e 2017 Prague 997.9 1001. -0.38 +8.2 4 75 % 8% Budapest 32536 32289 +0.7 +1.6 .47 .85 6% 7% Warsaw 2363. 2381. -0.74 +21. 45 00 % 33% Bucharest 8266. 8235. +0.3 +16. 26 90 7% 67% Ljubljana 777.9 778.6 -0.09 +8.4 5 3 % 1% Zagreb 1888. 1892. -0.23 -5.33 49 76 % % Belgrade <.BELEX15 713.9 715.7 -0.25 -0.47 > 8 5 % % Sofia 664.1 663.5 +0.1 +13. 9 4 0% 26%

BONDS Yield Yield Sprea Daily d

(bid) chang vs chang e Bund e in Czech sprea Republic d 2-year <CZ2YT=RR -0.16 0.018 +055 +3bp > bps s 5-year <CZ5YT=RR -0.01 0 +033 +3bp > 8 bps s 10-year <CZ10YT=R 0.818 0 +045 +2bp R> bps s

Poland

2-year <PL2YT=RR 2.01 -0.00 +272 +1bp > 2 bps s 5-year <PL5YT=RR 2.912 -0.00 +326 +2bp > 6 bps s 10-year <PL10YT=R 3.472 -0.00 +310 +1bp R> 6 bps s FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

inter bank

Czech Rep < 0.34 0.4 0.5 0

PRIBOR=>

Hungary < 0.25 0.34 0.44 0

BUBOR=>

Poland < 1.753 1.79 1.832 1.73

WIBOR=>

Note: FRA are for quotes ask

prices

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(Additional reporting by Luiza Ilie in Bucharest and Jason Hovet in Prague, editing by Ed Osmond)