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CEE MARKETS-Crown retreats after CNB signals more modest hikes ahead

* Crown falls from 4-year high after Czech central bank rate hike

* Rate hike was smaller as some bets, and unanimous decision

* Budapest stocks hit record high on pre-earnings MOL gains

* Kuna trades at weakest level since January

(Recasts with Czech central bank interest rate decision and crown reaction) BUDAPEST/PRAGUE, Nov 2 (Reuters) - The Czech crown retreated from a 4-year high on Thursday on surpise that the central bank's board had agreed unanimously to a modest 25 basis point rate hike and an outlook which pointed to fewer than expected rate hikes ahead. Although the crown extended gains from a 4-year high against the euro after the CNB decision to raise its key two-week deposit rate to 0.5 percent, it fell sharply after the CNB said its seven-member board made the decision unanimously. Some investors had expected a bigger, 50 bp hike or at least dissent on the size, because some central bankers have talked about a bigger step. At 1425 GMT the crown traded at 25.69 against the euro, weaker by half a percent from Wednesday. CNB Governor Jiri Rusnok said after the meeting that he saw no obstacle to further rate hikes at any upcoming meeting. He also said that the bank's updated forecasts expected further firming of the crown, and he added that the current exchange rate was close to earlier assumptions. Crown volatility increased because the monetary policy outlook was not as hawkish as some might have expected, Generali Investments CEE chief economist Radomir Jac said. He said the currency could firm past 25.5 in a sustainable way only early next year, even though the sound Czech economy and the prospect of rate hikes supported its story. "But the CNB indicates that it will maintain a cautious approach to interest rate hikes, as it is aware of the rising gap between monetary policy interest rates in the Czech Republic and in the euro zone," he added. While expectations for rate hikes have been a key factor strengthening the crown, it has also been supported by economic data showing healthy growth in economic output, similar to other economies in Central Europe. The Czech economy is seen remaining robust even though the election winner ANO may need to form a minority government after being shunned by other parties. While the CNB needs to fight inflation, which is above its 2 percent target, the key risk to the crown is how the central bank manages interest rate hike expectations, analysts have said. Elsewhere in Central Europe, the forint and the zloty changed little, more or less tracking the euro/dollar cross. Equities were mixed. Budapest's main index hit a new record high, boosted by an over 2 percent rise in the shares of oil group MOL which analysts expect to report good third-quarter earnings on Friday.

CEE MARKETS SNAPSH AT 1525 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.690 25.573 -0.45% 5.13% 0 5 Hungary 311.00 310.83 -0.05% -0.70% forint 00 50 Polish zloty 4.2355 4.2376 +0.05 3.98%

%

Romanian leu 4.5975 4.6030 +0.12 -1.36%

%

Croatian 7.5300 7.5215 -0.11% 0.33%

kuna

Serbian 118.80 118.92 +0.10 3.83% 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 1064.4 1067.7 -0.31% +15.4 0 1 9% Budapest 40067. 39611. +1.15 +25.2 13 64 % 0% Warsaw 2509.6 2524.9 -0.61% +28.8 0 0 3% Bucharest 7811.1 7790.3 +0.27 +10.2 1 3 % 5% Ljubljana 793.22 796.92 -0.46% +10.5

4%

Zagreb 1867.1 1874.4 -0.39% -6.40% 7 9 Belgrade 727.66 732.12 -0.61% +1.43

%

Sofia 669.85 670.90 -0.16% +14.2

3% BONDS

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

Republic

2-year 0.408 0.125 +116b +12bp ps s 5-year 0.805 0.089 +115b +9bps

ps

10-year 1.571 0.001 +120b +0bps

ps Poland

2-year 1.635 0.01 +238b +1bps

ps

5-year 2.702 0.03 +305b +3bps

ps

10-year 3.478 0.03 +310b +3bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.89 1.07 1.21 0

IBOR=>

Hungary <BU 0.09 0.12 0.14 0.03

BOR=>

Poland <WI 1.78 1.8325 1.9225 1.73

BOR=>

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

(Additional reporting by Bartosz Chmielewski in Warsaw and Igor Ilic in Zagreb; editing by Emelia Sithole-Matarise and Alexander Smith)