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CEE MARKETS-Forint off lows, Hungarian central bank seen easing

* Forint off, but near lows ahead of central bank meeting

* Hungarian central bank seen cutting overnight deposit rate

* Rate cut should be bigger than 10 bps for an impact-dealers

* Central European financial markets are rangebound

BUDAPEST, Sept 19 (Reuters) - The forint traded off multi-month lows against the euro on Tuesday as investors held their breath ahead of the Hungarian central bank's (NBH) meeting where it could announce further monetary easing measures. The NBH, the most dovish central bank in the European Union's eastern wing, has repeatedly indicated it would keep monetary conditions loose, even as the world's big central banks tighten their own policies. The bank, led by Gyorgy Matolcsy, a key ally of Prime Minister Viktor Orban who will face elections next year, will also discuss its quarterly inflation report, and is likely to demonstrate its willingness to boost economic growth. Its meetings earlier this year were "business as usual" due to expectations its base rate could stay unchanged at a record low 0.9 percent for years. But the bank turned even more dovish in the past few weeks and clearly signalled subdued inflation left it room to ease policies through tools other than its main rate. The guidance had softened the forint by Monday to its weakest levels since the end of June near 310 against the euro, from the 28-month high it reached at 301.72 after the bank's August rate meeting. On Tuesday it traded at 309.2 at 0815 GMT, up by 0.1 percent from Monday's close, and Hungarian government bonds were steady after a slide in yields in the past weeks. Central European financial asset prices were mostly rangebound. Investors are waiting to see how strong the easing measures will be compared with expectations, traders said. "The striking thing is that the forint has eased so much purely on the basis of market expectations, which are very strong," one Budapest-based currency dealer said. "Now the central bank must exceed the expectations if it wants further market impact," the dealer added. One policy change that most market participants expect is a 10 basis point cut in the overnight deposit rate, which stands at a record-low -0.05 percent. The bank is also expected to set a 150 billion forint limit on its 3-month deposit facility by the end of this year; that would be half of the limit valid for end-September. Such a measure would pump liquidity into interbank markets. "Negative interest rates, that is becoming increasingly rare in the world," one fixed income trader said. "The Hungarian central bank has communicated that it will still maintain that, whatever is going on in the world, and the market seems to accept that they can," the trader added.

CEE MARKETS SNAPSH AT 1015 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.135 26.126 -0.03% 3.34% 0 0 Hungary 309.20 309.57 +0.12 -0.12% forint 00 00 % Polish zloty 4.2898 4.2891 -0.02% 2.66% Romanian leu 4.6005 4.5987 -0.04% -1.42% Croatian 7.4700 7.4765 +0.09 1.14% kuna % Serbian 118.84 119.00 +0.13 3.80% 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 1049.7 1049.0 +0.07 +13.9 1 2 % 0% Budapest 38392. 38387. +0.01 +19.9 60 22 % 7% Warsaw 2509.0 2501.7 +0.29 +28.8 1 5 % 0% Bucharest 8017.7 7995.9 +0.27 +13.1 1 7 % 6% Ljubljana 798.23 798.81 -0.07% +11.2

4%

Zagreb 1799.8 1796.6 +0.18 -9.78% 0 1 % Belgrade 730.58 731.83 -0.17% +1.84

%

Sofia 667.35 669.32 -0.29% +13.8

0% BONDS

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

Republic

2-year -0.11 0.114 +058b +13bp ps s 5-year 0.071 0 +034b +1bps

ps

10-year 1.065 -0.009 +061b +0bps

ps Poland

2-year 1.767 0.009 +245b +2bps

ps

5-year 2.648 0.042 +291b +5bps

ps

10-year 3.308 0.033 +285b +4bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.72 0.87 0.97 0

IBOR=>

Hungary <BU 0.11 0.11 0.13 0.12

BOR=>

Poland <WI 1.759 1.786 1.82 1.73

BOR=>

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

(Reporting by Sandor Peto; Editing by Mark Potter)