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CEE MARKETS-Leu reaches multi-week high, liquidity shortage persists

* Leu gains to highest level vs euro since mid-August

* Romanian three-month interbank rate near three-year high

* Romanian central bank may pump more money into markets

* Czech crown rises to highest since cap on value removed

BUDAPEST/BUCHAREST, Oct 5 (Reuters) - The leu reached its strongest against the euro since mid-August on Thursday as Romanian interbank interest rates held near a three-year high. The three-month interbank rate was asked at 1.78 percent on Wednesday, only a touch off the three-year highs that it reached on Tuesday. In response, the central bank allotted 9.4 billion lei to commercial banks on Tuesday at its first such auction since 2015, to ease a shortage of liquidity. The bank said it could continue to pump money into interbank markets if it's needed. It also warned on Tuesday that rising inflation might require higher rather than lower interest rates. The leu touched multi-week highs against the euro on Thursday, trading at 4.5735 to the euro at 0845 GMT, up 0.1 percent. One Bucharest-based trader said stop-loss orders on the firm side of 4.6 helped the leu, but interest rates were not high enough to keep the currency at its current levels. "In the medium term, the leu will weaken," the trader said. "Nothing supports it, including the fiscal side. Apart from Romania, only the Czech central bank among Central Europe's policymakers have said they were worried about rising inflation. In August, the Czech central bank became the first in the European Union to raise rates since 2012. Expectations for a further rate increase in November have helped the crown climb to multi-year highs. On Thursday it reached 25.801 to the euro, its strongest since April, when the central bank removed a cap that had kept the crown weaker than 27 to the euro since late 2013. A strong crown could slow the pace of rate increases, Raiffeisen analyst Stephan Imre said in a note. Foreign investors sitting long crown positions have not rushed to take profit so far, allowing the currency to strengthen.

CEE MARKETS SNAPSH AT 1045 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.822 25.826 +0.02 4.59% 0 5 % Hungary 311.50 311.84 +0.11 -0.86% forint 00 00 % Polish zloty 4.3004 4.2967 -0.09% 2.41% Romanian leu 4.5735 4.5786 +0.11 -0.84%

%

Croatian 7.5060 7.5016 -0.06% 0.65%

kuna

Serbian 119.10 119.12 +0.02 3.57% 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 1053.9 1052.5 +0.14 +14.3 4 1 % 6% Budapest 37818. 37923. -0.28% +18.1 22 24 7% Warsaw 2448.1 2444.1 +0.16 +25.6 6 9 % 8% Bucharest 7899.8 7888.6 +0.14 +11.5 0 6 % 0% Ljubljana 801.61 800.92 +0.09 +11.7 % 1% Zagreb 1801.7 1801.3 +0.02 -9.68% 0 4 % Belgrade 720.44 720.66 -0.03% +0.43

%

Sofia 675.64 677.35 -0.25% +15.2

1% BONDS

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

Republic

2-year 0.335 0.024 +102b +1bps

ps

5-year 0.508 0.029 +077b +2bps

ps

10-year 1.333 -0.005 +088b -1bps

ps Poland

2-year 1.722 -0.017 +241b -3bps

ps

5-year 2.708 0.014 +297b +0bps

ps

10-year 3.381 0.006 +292b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.74 0.87 1 0

IBOR=>

Hungary <BU 0.07 0.11 0.14 0.03

BOR=>

Poland <WI 1.77 1.82 1.885 1.73

BOR=>

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

(Reporting by Sandor Peto, editing by Larry King)