CEE MARKETS-Hungarian forint edges up ahead of Magyar's budget plan

WARSAW, Oct 19 (Reuters) - The Hungarian forint edged up for a third straight session to touch a nearly four-week high on Monday, with markets anticipating that the government's 2027 budget plan would show a reduced deficit in an early step towards the potential adoption of the euro.

The 2027 budget, which will be presented in parliament at 1100 GMT, is seen as an important credibility test for Prime Minister Peter Magyar as he tries to curb the deficit to below the European Union's 3% target ceiling while still honouring the pledges that helped secure his landslide election win over Viktor Orban in April.

On Monday, Hungarian 10-year bond yields were steady at 5.30%, and the spread over the Czech benchmark, traditionally the lower yielding of regional debt equivalents, was just 4 basis points, its narrowest in data going back to 2003.

"Hungarian bonds have rallied strongly in recent weeks on growing expectations that the plan will target a deficit below 5% of GDP," ING wrote in a note. "However, much of the good news now appears priced in, creating downside risk if the government falls short of expectations."

The forint traded 0.09% firmer versus the euro at 362.20.

Economists polled by Reuters expect the deficit to fall to 5.3% of output in 2027, compared with the government's 7.5% target for 2026. Analysts see Hungary joining the euro in 2032 or 2033.

The forint in October is on course for its first monthly gain since May. While it hit a more than 4-year high beyond the 350 per euro level in June, it has struggled to maintain that momentum.

POLITICS IN POLAND, ROMANIA

The Polish zloty was 0.08% weaker at 4.372 per euro.

Commerzbank said in a note that uncertainty over central bank nominations was contributing to zloty underperformance.

Polish President Karol Nawrocki is again seeking Prime Minister Donald Tusk's approval for the appointment of four members of the National Bank of Poland's management board after an earlier attempt failed to secure government backing.

The Romanian leu was broadly stable at 5.324 as Prime Minister-designate Luca Niculescu looked likely to win a confidence vote scheduled for Tuesday.

"This should help stabilise EUR/RON after its decline late last week, and we expect the pair to settle around 5.340," ING said.

The Czech crown was 0.06% weaker at 24.335.