CEE MARKETS-Crown firms on CPI data, dinar hits 21-month highs

    * Czechs may start rate hikes as early as Aug on CPI
    * Crown firms, regional fx markets cautious ahead of Yellen
    * Dinar hits 21-month high, central bank may continue to

    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, July 12 (Reuters) - The Czech crown firmed
on Wednesday, leading cautious currency gains in Central Europe,
after June inflation figures fuelled expectations that the Czech
central bank will hike interest rates for the first time in
almost a decade before long.
    Of the region's central banks, the Czechs are the only ones
who have shifted to a hawkish policy bias.
    In April the bank ended its policy of capping the crown
 at 27 versus the euro, letting the currency
strengthen. Its forecasts have also factored in a hike in its
record low interest rates for the third quarter of the year. 
    Economic growth has picked up to around 3-4 percent in
Central European states, but a rise in inflation since last year
has lost steam in recent months.
    Data released on Wednesday showed a drop in annual inflation
to 2.3 percent in June from 2.4 percent in May.
    But the drop was the result of lower fuel inflation. A
continuing rise in core inflation to 2.6 percent provides the
CNB with sufficient argument to lift rates as early as its next
meeting on Aug. 3, Capital Economics analyst Liam Carson said in
a note.
    The crown firmed after the figures, approaching last week's
3-1/2-year highs of 26.048. But it was unable to break below the
26.1 line, and at 0855 GMT it traded at 26.105.
    Analysts remained split over the rate outlook.
    KBC analysts said in a note that the CNB faced a dilemma
after the data as the headline figure was above its 2 percent
target but below its own projection and may decrease further in
the next months.
    "Hence, the case (of) a rate hike in the third quarter,
which had been advocated by some Board members and it still
assumes the central bank projection, is not as clear as it
looks," they said.
    Other Central European currencies were mixed as investors
awaited more clues about global interest rate trends from
Federal Reserve chair Janet Yellen's testimony to the U.S.
Congress starting on Wednesday.
    The dinar, however, extended its recent gains and
hit 21-month highs against the euro. 
    The Serbian central bank kept the region's highest benchmark
rate on hold at 4 percent on Monday, citing uncertainties in
global interest rate trends.
    Just after the decision it had to keep intervening in the
market to prevent the dinar firming. Dealers said there were no
signs of continuing interventions early on Wednesday.
                CEE MARKETS  SNAPSH   AT  1055 CET         
                             Latest  Previo  Daily   Change
                             bid     close   change  in
 Czech crown                 26.105  26.135   +0.12   3.46%
                                  0       5       %  
 Hungary                     307.70  307.61  -0.03%   0.36%
 forint                          00      50          
 Polish zloty                4.2420  4.2436   +0.04   3.82%
 Romanian leu                4.5710  4.5726   +0.04  -0.79%
 Croatian kuna               7.4100  7.4095  -0.01%   1.96%
 Serbian dinar               120.00  120.24   +0.20   2.79%
                                 00      50       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             Latest  Previo  Daily   Change
                                     close   change  in
 Prague                      1000.4  996.79   +0.37   +8.56
                                  8               %       %
 Budapest                    35734.  35749.  -0.04%   +11.6
                                 91      57              6%
 Warsaw                      2323.7  2297.7   +1.13   +19.2
                                  0       3       %      9%
 Bucharest                   8159.2  8157.8   +0.02   +15.1
                                  0       1       %      6%
 Ljubljana                   807.57  809.28  -0.21%   +12.5
 Zagreb                      1862.0  1863.4  -0.07%  -6.66%
                                  5       3          
 Belgrade                    712.01  716.12  -0.57%  -0.75%
 Sofia                       710.22  708.77   +0.20   +21.1
                                                  %      1%
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
 Czech                                               spread
   2-year                    -0.099       0   +051b   +1bps
   5-year                     0.163   0.049   +026b   +6bps
   10-year                    1.019  -0.075   +049b   -6bps
   2-year                     1.841  -0.076   +245b   -6bps
   5-year                     2.677  -0.005   +278b   +1bps
   10-year                    3.334  -0.015   +280b   +0bps
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
 Czech Rep              <PR    0.42    0.51    0.59       0
 Hungary                <BU    0.21    0.23    0.31       0
 Poland                 <WI   1.755   1.779    1.85    1.73
 Note: FRA      are for ask                                
 quotes         prices                               
 (Additional reporting by Aleksandar Vasovic in Belgrade;
Editing by Hugh Lawson)