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UPDATE 1-CEE MARKETS-Forint hits 8-month high as ECB keeps easy money

BUDAPEST, July 20 (Reuters) - The forint led east European currencies higher on Thursday, hitting an 8-month high versus the euro after the European Central Bank (ECB) left its ultra easy monetary policy stance unchanged. ECB chief Mario Draghi stressed that the bank's governing council were unanimous both on the decision to keep its guidance unchanged and to avoid setting a precise date for a discussion of future policy, noting only that it would occur in the autumn.

The ECB's monetary stimulus has also boosted Central Europe's emerging assets in the past years. However, government bond yields in the region moved higher recently after Draghi raised the prospect of policy tightening last month. Investors in this part of the world focus on the policy of the European Central Bank, but also watch the Fed and U.S. long-term debt yields. Healthy economic growth and stability have underpinned the region's currencies even though the region's central banks are unlikely to lift interest rates this year, except for Czechs. "We think the ECB will only change its communication in the autumn after the German elections, making clearer hints about the expected monetary policy steps," said David Nemeth, an analyst at K&H Bank in a note. "We expect the ECB will start downsizing its asset buying program at the beginning of next year and could even end it by mid-2018," he added. A tapering of the ECB's stimulus could weaken currencies in eastern Europe, and could drive yields higher. By 1410 GMT the forint firmed more than 0.3 percent to 305.45, levels last seen in November 2016. The Czech crown and the Polish zloty were both 0.1 percent higher. The forint firmed despite sustained rhetoric by the National Bank of Hungary about using unconventional easing tools on top of record low interest rates to loosen monetary conditions further if inflation lastingly stays below its target. The bank kept interest rates unchanged as expected on Tuesday, with any price pressures from strong economic growth seen as unlikely to lift inflation beyond its 3 percent target level this year or next. In Poland, political clouds gathered as the European Union gave Warsaw a week to halt divisive judicial reforms or face punishment for undermining democracy. Stock markets were mostly in the red by the afternoon, giving up earlier gains. Oil and gas group MOL outperformed the wider Budapest market, rising 0.25 percent to 21,675 forints, after it announced a major chemicals investment. The main index of the bourse was down 0.7 percent, with OTP Bank dropping 2.4 percent after recent sharp gains.

CEE MARKETS SNAPSHOT AT 1557 CET

CURRENCIES

Latest Previ Daily Chang ous e bid close change in

2017

Czech crown 26.0420 26.07 +0.14 3.71% 80 % Hungary 305.5200 306.4 +0.32 1.08% forint 850 % Polish zloty 4.2055 4.210 +0.13 4.72% 9 % Romanian leu 4.5655 4.570 +0.11 -0.67 6 % % Croatian 7.4090 7.415 +0.09 1.97% kuna 5 % Serbian 120.4500 120.6 +0.18 2.41% dinar 700 % Note: daily calculated previous close 1800 change from at CET

STOCKS

Latest Previ Daily Chang ous e

close change in 2017

Prague 1007.36 1007. -0.06% +9.3 92 0% Budapest 35545.70 35789 -0.68% +11. .28 07% Warsaw 2364.88 2374. -0.40% +21. 31 41% Bucharest 8364.31 8268. +1.16 +18. 77 % 06% Ljubljana 799.23 801.0 -0.22% +11. 3 38% Zagreb 1870.30 1859. +0.61 -6.24 03 % % Belgrade 706.54 709.2 -0.38% -1.51 7 % Sofia 712.67 710.7 +0.27 +21. 8 % 53%

BONDS

Yield Yield Spread Daily (bid) chang vs chang e Bund e in Czech sprea Republic d 2-year -0.101 0.1 +055b +11b ps ps 5-year 0.004 -0.02 +016b +0bp 6 ps s 10-year 0.918 0 +039b +1bp ps s

Poland

2-year 1.824 -0.01 +248b +0bp ps s 5-year 2.653 -0.01 +281b +1bp ps s 10-year 3.285 0.005 +275b +1bp ps s FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

inter bank

Czech Rep <PR 0.47 0.62 0.7 0

IBOR=>

Hungary <BU 0.2 0.24 0.31 0.15

BOR=>

Poland <WI 1.754 1.782 1.829 1.73

BOR=>

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

(Reporting by Krisztina Than; Editing by Elaine Hardcastle)