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CEE MARKETS-Crown jumps on hike talk, forint and zloty weakest for months

* Crown hits strongest levels since Aug 3 Czech rate hike

* Expectations strengthen for hike at Wednesday's Czech meeting

* Dollar strength knocks forint, zloty to multi-month lows

* Government bonds retreat after rally, tracking European trend

BUDAPEST, Sept 27 (Reuters) - The Czech crown hit 7-week highs against the euro due on some expectation for a rate hike at the Czech central bank's (CNB) meeting on Wednesday, bucking a fall in the Polish zloty and Hungarian forint to multi-month lows. The Czechs have Central Europe's lowest inflation target at 2 percent and their price index has exceeded that level. The CNB is also more sensitive than regional peers to hawkish signals from big central banks in the world, mainly the European Central Bank. Federal Reserve Chair Janet Yellen said on Tuesday that the Fed needs to continue rate hikes despite uncertainty about inflation. The dollar jumped and its strength caused selling in the most liquid currencies in the European Union's emerging economies. The zloty touched 6-month lows against the euro beyond 4.3, to recover to 4.2985 by 0819 GMT. The forint touched its weakest level in almost five months at 311.95. The crown touched its strongest level against the euro since Aug. 3, when the CNB became the first EU bank to lift its interest rates since 2012, and is expected to increase its 0.25 percent main rate further to defend its inflation goal. A Reuters poll showed early this week that only 5 out of 16 analysts expected a hike for Wednesday. But 10 projected a 25 basis point rise at the next meeting in November when it may see more clearly concerning local economic trends and ECB policies. Expectations have strengthened that the hike could come as soon as on Wednesday. "A few expect a hike (again) today," one dealer said. While Central Europe's robust economic growth has helped its assets this year, the rising appetite for the dollar weighs on regional currencies with local negative factors. In Hungary, the central bank announced new monetary easing measures just last week. In Poland, President Andrzej Duda announced proposals earlier this week about judicial reforms and Poland's plans for the reform have fueled tension with Brussels and some EU capitals. While regional stocks mostly rose mildly, tracking Western Europe's main bourses, government bonds joined a fall of debt prices across Europe, with Hungarian yields reversing a decline to record lows. Poland's and Hungary's 10-year bond yields rose 3-4 basis points to 3.34 and 2.48 percent, respectively. Demand for bonds at a Czech auction on Wednesday "will be reasonable, despite the risk of rate hike, and especially demand for the shortest paper can be boosted by recent massive T-Bills redemptions," Komercni Banka traders said in a note.

CEE MARKETS SNAPSH AT 1019 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.018 26.038 +0.08 3.80% 0 5 % Hungary 311.50 311.37 -0.04% -0.86% forint 00 00 Polish zloty 4.2985 4.2860 -0.29% 2.45% Romanian leu 4.6005 4.5997 -0.02% -1.42% Croatian 7.5000 7.4905 -0.13% 0.73%

kuna

Serbian 119.25 119.52 +0.23 3.44% 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 1043.9 1042.5 +0.14 +13.2 9 0 % 8% Budapest 37436. 37319. +0.32 +16.9 99 24 % 8% Warsaw 2451.7 2443.3 +0.34 +25.8 6 4 % 7% Bucharest 7986.9 7942.5 +0.56 +12.7 0 0 % 3% Ljubljana 797.29 799.82 -0.32% +11.1

1%

Zagreb 1811.4 1812.3 -0.05% -9.20% 1 2 Belgrade 718.41 723.64 -0.72% +0.14

%

Sofia 680.70 683.35 -0.39% +16.0

8% BONDS

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

Republic

2-year 0.095 0.322 +078b +31bp ps s 5-year 0.284 0.119 +057b +10bp ps s 10-year 1.157 -0.025 +071b -6bps

ps Poland

2-year 1.712 0.016 +240b +0bps

ps

5-year 2.682 0.031 +297b +1bps

ps

10-year 3.347 0.037 +290b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.72 0.85 0.96 0

IBOR=>

Hungary <BU 0.07 0.1 0.13 0.04

BOR=>

Poland <WI 1.763 1.819 1.872 1.73

BOR=>

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

(Additional reporting by Jason Hovet and Robert Muller in Prague/Marin Goettig in Warsaw Editing by Jeremy Gaunt)