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CEE MARKETS-Crown hits multi-year high on rate hike comments, region is cautious

cautious@

* Crown strongest since 2013, bucking zloty and forint fall

* Czech central bankers say rate hike in H2 remains in cards

* Markets cautious due to British vote, ECB meeting, U.S. politics

* Serbian central bank seen keeping interest rates on hold

BUDAPEST/PRAGUE, June 8 (Reuters) - The crown hit its strongest levels since 2013 on Thursday after Czech central bankers repeated that they could start policy tightening later this year. Asset prices in Central European financial markets were mostly rangebound. Investors held their breath ahead of Thursday's British elections, the European Central Bank's meeting and the congressional testimony from ex-FBI director James Comey. Market impacts are unpredictable if Britain's Tories lose power, the ECB softens its policy stance or if the testimony raises risks to U.S. president Donald Trump's rule, analysts said. The crown still firmed 0.1 percent to 26.285 against the euro, touching its strongest levels since late 2013. The Czech central bank (CNB) could make its first interest rate rise in the second half of this year, Vice-Governor Mojmir Hampl said late on Wednesday. Another rate setter, Oldrich Dedek was quoted by the daily paper E15 said as saying that he saw no reason to question the bank's staff forecast which suggests a third-quarter hike. The bank has repeatedly said that the more the crown firms from its firmer cap at 27 against the euro, which the bank removed in April, the less needed rate tightening could be. Czech markets still price in a hike to come not earlier than the second quarter of 2018, Komercni Banka rates trader Dalimil Vyskovsky said. "I actually think (the market) is aware of the risks of much earlier rate hike, but it seems to be that people are positioned already," he said, adding that much will depend on the crown's gains and inflation developments. The CNB's 2-percent inflation target is lower than in Hungary or Poland. A hike would be the first in about a decade, and its tightening bias is in contrast with loose policy stance elsewhere in the region. Poland's central bank could keep rates at record lows until the end of 2018 because inflation is expected to stabilize, its governor reiterated on Wednesday. The zloty eased 0.2 percent past the 4.2 line against the euro, its weakest levels in almost three weeks. The forint eased a shade after May annual inflation came in slightly higher than expected, at 2.1 percent. This, however, will not change the central bank's dovish stance, analysts said. Healthy demand is expected at Thursday's bond auction, traders added. The dinar was steady ahead of a meeting by the Serbian central bank where its is expected to keep the region's highest benchmark rate at 4 percent on hold.

CEE MARKETS SNAPSH AT 1000 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.285 26.310 +0.10 2.75% 0 5 % Hungary 308.42 308.19 -0.07% 0.13% forint 00 50 Polish zloty 4.2090 4.2002 -0.21% 4.63% Romanian leu 4.5720 4.5745 +0.05 -0.81%

%

Croatian kuna 7.4065 7.4045 -0.03% 2.01% Serbian dinar 122.36 122.42 +0.05 0.81% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1010.3 1005.6 +0.47 +9.63 4 2 % % Budapest 35230. 35021. +0.60 +10.0 20 75 % 8% Warsaw 2307.2 2308.6 -0.06% +18.4 8 4 5% Bucharest 8661.7 8686.6 -0.29% +22.2 3 2 5% Ljubljana 793.62 793.09 +0.07 +10.6 % 0% Zagreb 1820.4 1821.0 -0.03% -8.74% 1 0 Belgrade 719.25 722.55 -0.46% +0.26

%

Sofia 677.75 681.10 -0.49% +15.5

7% BONDS

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

Republic

2-year -0.114 -0.043 +060b -4bps

ps

5-year -0.11 0.056 +033b +5bps

ps

10-year 0.753 -0.036 +047b -6bps

ps Poland

2-year 1.896 0.02 +261b +2bps

ps

5-year 2.636 0.034 +307b +2bps

ps

10-year 3.209 0.037 +293b +2bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.34 0.41 0.47 0

IBOR=>

Hungary <BU 0.19 0.24 0.29 0.15

BOR=>

Poland <WI 1.753 1.775 1.82 1.73

BOR=>

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

(Writing by Sandor Peto; Editing by Toby Chopra)