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CEE MARKETS-Crown retreats on rate setter comment, Polish shares drop

* Dovish Czech rate setter Tomsik says no hurry for rate hike

* Czech crown retreats from strongest level for years

* Czech PM's party helm, Romanian PM's job are at risk

* Investors watch Fed guidance rather than local politics

(Adds Czech auction result, fall of Polish shares) BUDAPEST/PRAGUE, June 14 (Reuters) - The Czech crown retreated from multi-year highs on Wednesday after Czech central bank Vice-Governor Vladimir Tomsik said its strength allows the CNB not to rush into rate hikes. Central European assets were mostly rangebound as investors awaited a meeting of the Federal Reserve. The crown shed less than 0.1 percent against the euro by 1307 GMT. But trading at 26.149, it was drifting away from overnight highs at 26.13, its strongest level since the CNB in April removed a cap of 27 on the currency, and also since late 2013 when the cap was introduced. The crown's strengthening, partly fueled by expectations of a rebound in inflation and CNB rate hikes, received fresh impetus on Tuesday through "buy" recommendations from banks including Citigroup. But Tomsik, regarded as a dovish rate setter, was quoted by the newspaper Hospodarske Noviny as saying the crown had got stronger since the bank's latest outlook, which indicated rates rising in the second half of 2017. "(This) means that we do not need to hurry quickly with raising rates," he said. Even a delay to the fourth quarter from the third would retain a gap with markets, which have priced in a hike only for the second quarter of 2018, Komercni Banka trader Dalimil Vyskovski said. He added that Tomsik's comments were "somewhat surprising. "Market rates now (are) increasingly in a 'conundrum' mode." An auction of Czech government bonds drew decent demand for long-dated papers, but little appetite for the zero-coupon 2022-expiry bond. Investors in the region seek cues from the U.S. Federal Reserve's guidance over its rate hike cycle. The Fed is likely to go ahead with another 25-basis-point rate increase on Wednesday, the fourth hike of a rate increase cycle that started in December 2015. The zloty eased to 4.1945 against the euro. "The tone of the Fed... may create pressure for Polish IRS rates and bond yields to rise, and the holiday in Poland tomorrow may strengthen this reaction," BZ BWK analysts said in a note. Warsaw's main equities index dropped slightly, driven by a fall of the shares of Pekao bank and state-run insurer PZU, after PKO's supervisory board dismissed its long-serving, respected Chief Executive Officer Luigi Lovaglio. PZU and state-controlled fund PFR completed Pekao's takeover from Italian UniCredit last month. Elsewhere, Budapest's main index hit another record high, briefly piercing the 36,000-point psychological level.

CEE MARKETS SNAPSH AT 1507 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.149 26.141 -0.03% 3.28% 0 0 Hungary 306.06 306.23 +0.06 0.90% forint 00 50 % Polish zloty 4.1925 4.1933 +0.02 5.04%

%

Romanian leu 4.5672 4.5655 -0.04% -0.71% Croatian kuna 7.4000 7.4105 +0.14 2.10%

%

Serbian dinar 122.08 122.30 +0.18 1.04% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1001.6 1001.3 +0.03 +8.68 3 0 % % Budapest 35929. 35588. +0.96 +12.2 87 70 % 7% Warsaw 2298.8 2302.4 -0.16% +18.0 1 1 1% Bucharest 8468.7 8446.2 +0.27 +19.5 2 3 % 3% Ljubljana 788.60 797.46 -1.11% +9.90

%

Zagreb 1856.4 1854.5 +0.10 -6.94% 5 9 % Belgrade 719.91 719.93 +0.00 +0.35 % % Sofia 680.85 681.05 -0.03% +16.1

0% BONDS

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

Republic

2-year -0.048 0 +063b -2bps

ps

5-year -0.096 -0.022 +035b -1bps

ps

10-year 0.856 0.074 +062b +10bp ps s

Poland

2-year 1.914 0.075 +259b +5bps

ps

5-year 2.566 -0.033 +301b -2bps

ps

10-year 3.129 -0.038 +289b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.34 0.41 0.49 0

IBOR=>

Hungary <BU 0.36 0.23 0.275 0.15

BOR=>

Poland <WI 1.753 1.7625 1.7975 1.73

BOR=>

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

(Additional reporting by Marcin Goettig and Marcin Goclowski in Warsaw, Luiza Ilie in Bucharest editing by Mark Heinrich)