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CEE MARKETS-Crown hits 4-year high despite election uncertainty

* Rate hike expectations continue to fuel Czech crown rally Coalition talks after Oct 20-21 vote may cause some retreat

* Zloty, forint trade near multi-week highs, bonds lose steam

BUDAPEST, Oct 17 (Reuters) - The crown hit 4-year highs on Tuesday, helped by expectations for interest rate hikes by the Czech central bank (CNB) and strong economic growth in the European Union's eastern wing. The crown firmed 0.2 percent to 25.765 against the euro by 0822 GMT. Czech forward rate agreements have fully priced in 25 basis point increase in the CNB's main rate in the next three months, which it started to increase in August in the first central bank rate hike in the European Union since 2012. The crown early this month broke through a resistance at 26 which had held it up for months, "driven not only by supportive economic conditions, but especially by ongoing rate hike expectations," Raiffeisen analyst Wolfgang Ernst said in a note. "The upcoming legislative election (20-21 October) and possibly difficult coalition forming thereafter could cause some (short) disruption in the appreciation trend," he added. Billionaire Andrej Babis' ANO party has a double-digit lead over its closest rival in opinion polls. When Babis was finance minister, "the overall economic standing of the country has improved", but being a divisive person, some crown retreat may be in the cards, Nordea analyst Natalia Kornela Setlak said in a note. "If Babis maintains his ambition to become the next Czech PM, the post-election government formation might take longer than usual, increasing political instability and possibly weakening the CZK slightly," she said. Three-month outright crown forwards were bid at 25.748, showing some firming from current levels. Sentiment in the region's currency markets remained generally positive, even though a rally of Polish and Hungarian government bonds lost steam. The zloty, trading at 4.2335 against the euro, was steady near 3-month highs reached on Monday. It has been helped by Monday's figures showing a narrower-than-expected August current account deficit, and wage and jobless figures due later on Tuesday are expected to confirm robust economic growth. The daily Dziennik Gazeta Prawna daily said Poland's state budget recorded a surplus in the January-September period despite expectations of a deficit. The forint firmed 0.1 percent to 307.81, slightly off Monday's 5-week high set at 307.35, supported by Hungary's growth, trade surpluses and stability. The Hungarian central bank is expected to cut its overnight deposit interest rate of -0.15 percent further at its meeting next week based on the interest rate implied in the fx swap auction which the bank held on Monday, one dealer said. "The world is still awash in money, whatever the Fed and the ECB are dragging their feet," another trader said.

CEE MARKETS SNAPSH AT 1022 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.765 25.814 +0.19 4.82% 0 0 % Hungary 307.81 308.16 +0.11 0.33% forint 00 00 % Polish zloty 4.2335 4.2321 -0.03% 4.03% Romanian leu 4.5850 4.5840 -0.02% -1.09% Croatian 7.5055 7.5055 +0.00 0.66% kuna % Serbian 119.07 119.08 +0.01 3.59% 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 1054.3 1052.7 +0.15 +14.4 3 5 % 0% Budapest 38999. 39119. -0.31% +21.8 74 89 6% Warsaw 2526.7 2534.5 -0.31% +29.7 8 2 2% Bucharest 8061.7 8032.3 +0.37 +13.7 7 8 % 9% Ljubljana 808.71 814.28 -0.68% +12.7

0%

Zagreb 1857.9 1855.0 +0.16 -6.86% 8 9 % Belgrade 729.41 730.90 -0.20% +1.68

%

Sofia 669.29 670.28 -0.15% +14.1

3% BONDS

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

Republic

2-year 0.126 -0.046 +086b -5bps

ps

5-year 0.535 0.055 +088b +6bps

ps

10-year 1.391 0.025 +102b +3bps

ps Poland

2-year 1.694 0.001 +242b +0bps

ps

5-year 2.65 0.005 +299b +1bps

ps

10-year 3.275 0.004 +290b +1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.79 0.95 1.07 0

IBOR=>

Hungary BU 0.07 0.11 0.15 0.03

BOR=>

Poland <WI 1.77 1.808 1.868 1.73

BOR=>

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

(Additional reporting by Jason Hovet in Prague and Marcin Goclowski in Warsaw; Editing by Keith Weir)