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CEE MARKETS-Leu touches 4-year low, CEE units ease on risk aversion

* Dollar rebound, profit-taking, politics weaken currencies

* Romanian leu at 4-yr low amid fresh political uncertainty

* Markets shrug off Czech PM giving up party leadership

* Asset price losses moderate, local economies still strong

BUDAPEST, June 15 (Reuters) - Central European currencies eased on Thursday due to a combination of risk aversion, profit-taking and political turbulence in Bucharest and Prague. In global markets, the U.S. Federal Reserve's interest rate hike and guidance for more to come helped the dollar rebound following a drop prompted by an unexpected slowing of U.S. inflation and retail sales in May. Dollar buying often weakens currencies in emerging markets, including the European Union's eastern members. "This is the classical correlation now... but it is not a big weakening (in Central European exchange rates)," one Budapest-based fixed income trader said. The zloty and the Czech crown are still near multi-year highs and the forint near the 8-month highs that they reached in recent weeks, supported by robust growth and stability in the region's main economies. On Thursday the forint and the zloty, weakened by 0.3 percent against the euro by 0847 GMT, with the Polish currency retreating behind the 4.2 line. Polish domestic markets are closed due to a national holiday. The region's main stock indices eased by 0.4-0.5 percent, tracking Western European peers as the U.S. data triggered some concerns over global economic growth. Long-term Hungarian government bond yields were lower by a few basis points from Wednesday's fixing, with 10-year paper trading at around 2.92 percent. "The 10-year U.S. yield is also near (7-month) lows, despite the hawkish Fed... and while they stay low, our yields will be kept down too," said Gergely Urmossy, analyst of Erste in Budapest. The crown and the leu shed 0.1 percent against the euro. The crown, trading at 26.18, is still near its strongest levels since 2013, buoyed by a robust economy and expectations for central bank rate hikes later this year or next. Investors in the Czech Republic usually shrug off domestic political news, like Prime Minister Bohuslav Sobotka's announcement on Wednesday that he would step down as the leader of his Social Democrat party. Romania's ruling Social Democrats, meanwhile, withdrew their support from their own government late on Wednesday, leading to political turmoil. President Klaus Iohannis urged the ruling party to resolve the crisis with a no-confidence vote in parliament if Prime Minister Sorin Grindeanu is unwilling to resign. The leu's reaction was muted, declining just 0.2 percent to 4.589, though this represented a new four-year low for a currency that was underperforming the region even before the latest political turmoil. The currency has been under pressure over concerns that the leftist government's wage hikes and tax cuts could boost the budget deficit and stoke inflation by next year.

CEE MARKETS SNAPSH AT 1047 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.180 26.147 -0.13% 3.16% 0 0 Hungary 306.73 305.67 -0.34% 0.68% forint 00 50 Polish zloty 4.2035 4.1929 -0.25% 4.77% Romanian leu 4.5873 4.5808 -0.14% -1.14% Croatian kuna 7.3980 7.4005 +0.03 2.12%

%

Serbian dinar 122.12 122.15 +0.02 1.01% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1000.3 1000.1 +0.01 +8.54 0 5 % % Budapest 35853. 35985. -0.37% +12.0 61 82 3% Bucharest 8440.1 8477.1 -0.44% +19.1 0 2 3% Ljubljana 784.92 788.60 -0.47% +9.38

%

Zagreb 1855.8 1854.5 +0.07 -6.97% 4 9 % Belgrade 719.06 719.91 -0.12% +0.24

%

Sofia 678.87 681.81 -0.43% +15.7

6% BONDS

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

Republic

2-year -0.091 -0.043 +057b -7bps

ps

5-year -0.069 0.027 +035b -1bps

ps

10-year 0.86 0.077 +061b +6bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.32 0.39 0.47 0

IBOR=>

Hungary <BU 0.36 0.22 0.28 0.15

BOR=>

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

(Reporting by Sandor Peto; Editing by Gareth Jones)