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CEE MARKETS-Crown softens ahead of rate meeting, other currencies mixed

* Czech central bank raises banks' countercyclical buffer rate

* Fails to lift the crown, main rate seen on hold on Thursday

* Warsaw/Brussels showdown watched

* Dinar bid at 4-week-highs as Fitch and S&P upgrade Serbia

BUDAPEST/WARSAW, Dec 18 (Reuters) - The crown eased on Monday despite a new Czech central bank (CNB) measure to tighten liquidity, amid expectations that the bank will not continue to lift its main interest rates on Thursday. The CNB raised domestic banks' countercyclical buffer rate to 1.25 percent from 1 percent. The crown eased 0.1 percent to 25.69 against the euro, approaching Friday's 7-week lows of 25.72 set as expectations for a rate hike on Thursday had dwindled. Czech statistics released on Monday showed a 0.9 percent annual rise in the industrial producer price index in November, below analysts' 1.3 percent forecast. Earlier, annual inflation showed a slowdown to 2.6 percent. That rate is still above the CNB's 2 percent goal. The latest, generally tame inflation figures in the European Union's eastern wing did not supply central bank hawks with arguments. The prospect of dollar gains if U.S. lawmakers pass a tax cut bill later this week does not support the region's currencies either, and Warsaw also faces a showdown with Brussels over the rule of law in Poland. "(But) the major CEE (Central and Eastern European) currencies are currently profiting from a solid EM (emerging markets) and risk-taking sentiment," Raiffeisen analyst Gunter Deuber said in a note. Interest rates in Poland are likely to stay unchanged by the end of 2019, rate setter Kamil Zubelewicz was quoted as saying The zloty eased and the forint firmed mildly, and the leu gained 0.1 percent. Polish industrial output and retail sales data due this week could be supportive, but that has been mostly priced in, traders said. On the other side, the European Commission on Wednesday may trigger a so-called "Article 7" procedure against Warsaw. That would bring Poland one step closer to losing its voting right in the EU, but that is unlikely to happen. "The risk of financial sanctions is still remote," BZ WBK analysts said in a note. Hungary's central bank is expected to keep rates on hold on Tuesday, but could release more details of its new programmes to push long-term interest rates lower. Elsewhere, the dinar was briefly bid at 4-week highs at 118.5 against the euro on Monday, after Fitch and Standard & Poor's upgraded Serbia's credit rating late on Friday. Their move should nudge Serbia towards cutting the region's highest central bank rate further, the bank's former governor, Dejan Soskic, told the N1 television channel. "Another and perhaps more important factor (lifting the dinar) was payment of VAT by companies which was on Friday and that boosted the demand for the dinar," one Belgrade-based dealer said.

CEE MARKETS SNAPSH AT 1031 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.690 25.675 -0.06% 5.13% 0 5 Hungary 313.88 314.02 +0.05 -1.61% forint 00 50 % Polish zloty 4.2130 4.2110 -0.05% 4.53% Romanian leu 4.6270 4.6308 +0.08 -1.99%

%

Croatian 7.5490 7.5465 -0.03% 0.08%

kuna

Serbian 118.63 118.65 +0.02 3.98% 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 1065.7 1062.0 +0.35 +15.6 8 5 % 4% Budapest 38735. 38657. +0.20 +21.0 04 37 % 4% Warsaw 2439.4 2416.9 +0.93 +25.2 7 5 % 3% Bucharest 7634.2 7603.3 +0.41 +7.75 9 1 % % Ljubljana 790.29 793.01 -0.34% +10.1

3%

Zagreb 1849.4 1859.3 -0.53% -7.29% 3 4 Belgrade 747.60 743.52 +0.55 +4.21 % % Sofia 664.78 664.67 +0.02 +13.3 % 6%

BONDS

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

Republic

2-year 0.337 -0.007 +104b -2bps

ps

5-year 0.78 0.016 +110b +0bps

ps

10-year 1.455 0.029 +115b +3bps

ps Poland

2-year 1.676 0.007 +238b -1bps

ps

5-year 2.618 0.002 +294b -1bps

ps

10-year 3.245 0.005 +294b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 1.03 1.24 1.38 0

IBOR=>

Hungary <BU 0.03 0.06 0.1 0.03

BOR=>

Poland <WI 1.759 1.796 1.898 1.72

BOR=>

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

(Additional reporting by Aleksandar Vasovic in Belgrade, editing by Louise Heavens)