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CEE MARKETS 1-Zloty holds gains after rate decision, stocks rise

Thursday, 4 Oct 2012 | 3:59 AM ET

* Zloty holds gains as market still prices monetary easing

* Prospects for Hungary's IMF deal still uncertain

BUDAPEST, Oct 4 (Reuters) - The zloty held gains in early Thursday trade after Poland kept interest rates unchanged in the previous session, going against market expectations for a cut, while stock markets across central Europe inched higher.

At 0740 GMT, the zloty

was flat, as were most other central European currencies. Stock markets across the region were up by 0.1-0.4 percent.

Poland's central bank left its key interest rate at 4.75 percent on Wednesday, defying market expectations it would cut rates for the first time since 2009 to shore up an economy that is slowing fast.

Analysts at Commerzbank said if Polish economic data were to disappoint in the weeks ahead, confirming market expectations that Wednesday's central bank decision only delayed future monetary easing, the zloty could come under pressure.

"The rate step might simply have been postponed," Commerzbank said.

"Should economic data over the coming weeks be similarly disappointing as last month, rate cut speculation is likely to gather momentum again ending the breather the PLN enjoyed."

A Reuters poll, released on Wednesday, forecast the zloty would ease to 4.15 by the end of the year before rebounding to 4.05 within 12 months.

"The market is still pricing 100 basis points of cuts in the next 12 months. However, the timing of the first cut has been moved from September to November," SEB said in a note.

"Obviously, the central bank's decision didn't change the market view that a full easing cycle lies ahead of us. We agree with market pricing and see the base rate reaching 3.75 percent by the end of Q1 2013 and staying there for some time."

The Czech and Hungarian central banks cut their main interest rates last week to help their recession-hit economies.

The volatile Hungarian forint

was unchanged in early trade but was supported by market expectations for a financing deal from the International Monetary Fund and the European Union.

Mihaly Varga, Hungary's chief negotiator with the IMF, said a long-delayed agreement could help shield the indebted country against the debt crisis in the euro zone but he also said there might not be an agreement.

"He said one thing in one sentence and another in the next," a Budapest-based currency dealer said. "So that is like if he had said nothing at all, really. We are no closer to finding out whether there will be an agreement or not."

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Currency Latest Previous Local Local close currency currency change change today in 2012 Czech crown 25.003 25 -0.01% +2.17% Polish zloty 4.085 4.085 0% +9.29% Hungarian forint 285.5 285.75 +0.09% +10.19% Croatian kuna 7.477 7.475 -0.03% +0.52% Romanian leu 4.543 4.533 -0.22% -4.89% Serbian dinar 115 115.06 +0.05% -7% All data taken from Reuters at 0932 CET. Currency percent change calculated from the daily domestic close at 1600 GMT. For related news and prices, click on the codes in brackets: All emerging market news Spot FX rates Eastern Europe spot FX Middle East spot FX Asia spot FX Latin America spot FX Other news and reports World central bank news Economic Data Guide Official rates Emerging Diary Top events Diaries Diaries Index

(Reporting by Reuters bureaus; Writing by Gergely Szakacs; Editing by Susan Fenton)

((gergely.szakacs@thomsonreuters.com)(+36 1 327 4748)(Reuters Messaging: gergely.szakacs.thomsonreuters.com@reuters.net))

Keywords: MARKETS EASTEUROPE/

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