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CEE MARKETS-Dinar retreats on surprise rate cut, ECB comments weaken crown

* Dinar eases as central bank cuts rates to help growth

* Crown weakens as ECB comments do not back rate hike bets

* CEE banks not worried by inflation apart from Czechs

(Adds Czech crown, impact of ECB comments) BUDAPEST/PRAGUE, Sept 7 (Reuters) - The dinar eased on Thursday after Serbia's central bank surprised by cutting its main interest rate to help economic growth. The Czech crown tested 3-week lows against the euro as some investors were disappointed over the European Central Bank's (ECB) message after its meeting, while Polish government bond prices extended this week's gains. The ECB flagged that it was preparing to scale back its stimulus programme, but its signal was too weak to buoy expectations that tigthening could come soon and encourage the Czech central bank (CNB) to raise its own rates further. "(The CNB) might want to wait for the ECB's next update on APP (asset purchases)," said Jiri Polansky, analyst of Ceska Sporitelna. "We think that the crown is near levels where some investors might close their positions as there is very muted chance for the currency to strengthen further," he added. The Serbian central bank (CBS), meanwhile, reduced Central Europe's highest main interest rate to The Serbina central bank 3.75 percent, after keeping it steady at 4 percent for more than a year. All 10 analysts and traders polled by Reuters had expected an unchanged rate, and the bank had repeatedly said that uncertainties in global markets justified caution in policies.

But on Thursday it said it wanted to give "additional support to lending activity and economic growth". Earlier this week, Prime Minister Ana Brnabic and the International Monetary Fund said Serbia's growth could fall behind earlier forecasts. The dinar eased 0.1 percent against the euro to 119.6 by 1432 GMT, drifting away from four-year highs set late last month at 118.78. It was helped in recent months by seasonal foreign currency inflows, including financing for infrastructure projects. But analysts in a Reuters poll this week projected a 3 percent weakening for the next 12 months, while other regional currencies in the region are seen firming. "Strong RSD (dinar) has combined with low oil prices in providing a small, if surprise, opportunity for the CBS to cut rates," said Peter Attard Montalto, an analyst at Nomura. "The economy has relatively tight fiscal policy this year whilst it does not have the (European Union) structural fund boon its neighbors do, and so there is some scope for a small amount of easing," he added. The cut swings the balance towards central bank doves in the region. The CNB became the first in the region and the European Union last month to raise interest rates in more than five years, but its 2 percent inflation target is the lowest in Central Europe. Hungary's central bank has flagged further monetary easing and the Polish central bank has not indicated concerns over inflation either.

CEE MARKETS SNAPSH AT 1632 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.142 26.108 -0.13% 3.31% 0 0 Hungary 305.85 306.48 +0.21 0.97% forint 00 50 % Polish zloty 4.2540 4.2455 -0.20% 3.52% Romanian leu 4.5985 4.5970 -0.03% -1.38% Croatian 7.4310 7.4307 +0.00 1.67% kuna % Serbian 119.60 119.45 -0.13% 3.14% dinar 00 00 Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1019.1 1024.9 -0.57% +10.5 5 5 8% Budapest 37798. 37878. -0.21% +18.1 05 86 1% Warsaw 2492.5 2512.4 -0.79% +27.9 2 0 6% Bucharest 7973.4 8015.7 -0.53% +12.5 7 3 4% Ljubljana 813.87 812.44 +0.18 +13.4 % 2% Zagreb 1883.6 1888.9 -0.28% -5.57% 7 0 Belgrade 729.28 727.70 +0.22 +1.66 % % Sofia 705.87 705.93 -0.01% +20.3

7% BONDS

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

Republic

2-year -0.022 0.005 +073b +2bps

ps

5-year 0.088 0.111 +048b +15bp ps s 10-year 0.897 0.006 +060b +4bps

ps Poland

2-year 1.664 0.018 +242b +3bps

ps

5-year 2.494 -0.031 +289b +1bps

ps

10-year 3.144 -0.038 +284b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.7 0.81 0.9 0

IBOR=>

Hungary <BU 0.15 0.2 0.24 0.15

BOR=>

Poland <WI 1.755 1.774 1.799 1.73

BOR=>

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

(Reporting by Sandor Peto; Editing by Ralph Boulton)