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CEE MARKETS-Hungary's forint recovers, bond rally loses steam

* Forint is recovers from its lowest in five months

* Hungarian debt rally loses steam as forint slumps

* Hungary offers deal to replace dollar bonds with euro debt

* Politics weigh on zloty, leu

* Czech central bank may raise rates again

BUDAPEST, Sept 26 (Reuters) - Hungary's forint regained some ground on Tuesday but remains near five-month lows after the country's central bank further loosened monetary policy last week. The central bank has lowered its inflation forecasts, cut interest rates, pledged liquidity-boosting measures and held a foreign-exchange swap auction on Monday to provide banks with forint liquidity. Those measures combined to cause the forint to fall on Monday. The slide ended on Tuesday, with the currency inching up 0.1 percent to 311.25 by 1003 GMT. A bond rally petered out as the currency weakened. On Tuesday, the government held its first three-month Treasury bill auction since the measures. The sale drew solid demand, despite negative yields at Hungary's last bill auctions . The Hungarian state debt agency on Tuesday also announced a deal to buy back dollar-denominated bonds and replace them with longer-dated euro bonds, days after a similar deal by Slovenia. With the forint's 310 resistance broken, 315 could be the next target, but the euro has been overbought, Erste analysts said in a note. "Thus testing back the 308-310 range is possible, before the 315 level gets in reach," they said. In general, Central Europe's economic growth and subdued inflation have help buoy its assets, although political risks weigh on the zloty and the leu. Inflation has risen above targets only in the Czech Republic. A Reuters poll showed most analysts expect the Czech central bank to raise interest rates either at its meeting on Wednesday or, more likely, in November. But a large number of outstanding long positions is keeping investors cautious, and the crown remains on the weak side of 26 to the euro. September inflation figures due in Poland on Friday will be a key indicator of about regional inflation trends. The zloty eased slightly, after some jitters on Monday when Polish President Andrzej Duda presented proposals for an overhaul of the judiciary system. Earlier, he had vetoed government bills on the judiciary reform, which had raised worries over the rule of law in Poland. Duda's own proposals may maintain tension with the European Union over the issue. The leu traded a shade weaker, at the 4.6 psychological line against the euro as the issue of corruption kept Romanian politics boiling. The government has asked Deputy Prime Minister Sevil Shhaideh and Rovana Plumb, the minister in charge of European funds, not to resign despite corruption charges.

CEE MARKETS SNAPSH AT 1203 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.065 26.054 -0.04% 3.61% 0 5 Hungary 311.25 311.51 +0.08 -0.78% forint 00 00 % Polish zloty 4.2855 4.2806 -0.11% 2.76% Romanian leu 4.6000 4.5989 -0.02% -1.41% Croatian 7.4900 7.4835 -0.09% 0.87%

kuna

Serbian 119.35 119.30 -0.04% 3.35% dinar 00 00 Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1043.8 1041.4 +0.22 +13.2 2 9 % 6% Budapest 38066. 38107. -0.11% +18.9 75 87 5% Warsaw 2442.6 2453.1 -0.43% +25.4 1 5 0% Bucharest 7927.9 7888.6 +0.50 +11.9 4 4 % 0% Ljubljana 803.12 802.66 +0.06 +11.9 % 2% Zagreb 1820.0 1819.3 +0.04 -8.76% 5 6 % Belgrade 722.59 724.02 -0.20% +0.73

%

Sofia 686.30 680.87 +0.80 +17.0 % 3%

BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year 0.078 0.023 +078b +3bps

ps

5-year 0.239 0.052 +055b +5bps

ps

10-year 1.096 -0.01 +070b -1bps

ps Poland

2-year 1.693 0.006 +240b +2bps

ps

5-year 2.646 0.016 +295b +2bps

ps

10-year 3.304 0.016 +290b +2bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.73 0.85 0.94 0

IBOR=>

Hungary <BU 0.07 0.08 0.12 0.04

BOR=>

Poland <WI 1.77 1.81 1.87 1.73

BOR>

Note: FRA are for ask quotes prices ******************************************************** *****

(Additional reporting from Warsaw, editing by Larry King)