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CEE MARKETS-Prague shares hit seven-week high, forint stays firmer

PRAGUE, July 18 (Reuters) - Prague stocks rose to a seven-week high on Tuesday after a tender offer lifted shares of artificial textile maker Pegas Nonwovens, while Hungary's forint firmed despite a dovish central bank holding steady as expected. Central European currencies have gained strength in recent weeks on the back of a softer dollar, which has lost some favor as other major central banks signal they could change monetary policy. The region is trading at more than 2-year highs against the U.S. currency. The dollar continued to fall, hit by the latest collapse of U.S. President Donald Trump's efforts to deliver a new healthcare bill. The weaker dollar is helping central European currencies against the euro, the region's main trading pair. The forint was just off a one-month high against the euro on Tuesday and was bid at 306.69 at 1316 GMT, up 0.1 percent. The forint showed little reaction to the Hungarian central bank leaving interest rates at record lows on Tuesday. The bank said it was ready to loosen policy if needed. Analysts have forecast the bank may keep borrowing costs unchanged into 2019. Capital Economics said, however, it may need to tighten next year. "There is a growing risk that the bank fails to shift its dovish stance, which could cause a nasty inflation shock and prompt more aggressive rate hikes further down the road," emerging Europe economist Liam Carson said. Other currencies were mixed, with the Polish zloty up a tad and the Czech crown edging down less than 0.1 percent. The Romanian leu inched up while Bucharest stocks added 0.5 percent on Tuesday, to lead central Europe's gain. Prague rose on the back of an almost 9 percent jump in Pegas. Czech investment group R2G launched an offer to buy the group, although analysts said the bid might not be high enough.

CEE SNAPSHOT AT 1520 CET

MARKETS CURRENCIES

Latest Previous Daily Change bid close change in 2017 Czech crown 26.0770 26.0625 -0.06% 3.57% Hungary 306.6900 307.0100 +0.10% 0.69%

forint

Polish 4.2025 4.2038 +0.03% 4.79%

zloty

Romanian 4.5595 4.5617 +0.05% -0.54%

leu

Croatian 7.4130 7.4115 -0.02% 1.92%

kuna

Serbian 120.4600 120.3500 -0.09% 2.40%

dinar

Note: daily calculated previous close at 1800 change from CET

STOCKS

Latest Previous Daily Change close change in 2017 Prague 1008.19 1005.36 +0.28% +9.39% Budapest 35893.54 36140.65 -0.68% +12.16

%

Warsaw 2360.41 2372.17 -0.50% +21.18

%

Bucharest 8216.94 8155.34 +0.76% +15.98

%

Ljubljana 800.45 803.27 -0.35% +11.55

%

Zagreb 1844.12 1853.82 -0.52% -7.56% Belgrade 708.46 713.09 -0.65% -1.24% Sofia 706.28 710.93 -0.65% +20.44

% BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year -0.125 0.025 +052bp +5bps

s

5-year -0.08 -0.096 +004bp -9bps

s

10-year <CZ10YT=RR 0.911 0 +035bp +2bps > s

Poland

2-year 1.831 -0.006 +247bp +2bps

s

5-year 2.654 -0.017 +278bp -1bps

s

10-year <PL10YT=RR 3.264 -0.024 +270bp -1bps > s FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interba nk

Czech Rep P 0.43 0.53 0.61 0

RIBOR=>

Hungary <B 0.21 0.23 0.29 0.15

UBOR=>

Poland <W 1.754 1.777 1.819 1.73

IBOR=>

Note: FRA are for quotes ask prices

(Reporting by Jason Hovet in PRAGUE, Luiza Ilie in BUCHAREST, and Krisztina Than in BUDAPEST; Editing by Catherine Evans, Louise Heavens)