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CEE MARKETS-Crown softens as market focuses on rate meeting, other currencies firm

firm@

* 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

(Adds Hungarian government bonds yield decline, Polish wages) BUDAPEST/WARSAW, Dec 18 (Reuters) - The crown eased slightly on Monday on rising expectations that the Czech central bank (CNB) will not lift its main interest rates when it meets later this week. The CNB did raise domestic banks' countercyclical buffer rate to 1.25 percent on Monday, from 1 percent, but the crown did not react. The crown eased a tad to 25.68 against the euro by 1356 GMT, off Friday's seven-week low of 25.72 set as expectations for a rate hike when the bank meets on Thursday dwindled. Recent tame inflation data from the region and the prospect of dollar gains if U.S. lawmakers pass a tax cut bill later this week, are not supportive for central and eastern European currencies. "(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. The forint got additional support from the closing of short government bond positions, even as the Hungarian central bank is expected to reaffirm its loose policy stance on Tuesday. Primary dealers were informed by the government debt management agency that it would not hold its regular bi-weekly bond tender this week, one Budapest fixed income trader said. AKK confirmed that to Reuters. Hungarian bond yields fell 4-6 basis points from Friday's fixing along the curve. Interest rates in Poland are likely to stay unchanged by the end of 2019, rate setter Kamil Zubelewicz was quoted as saying The zloty firmed 0.1 percent. The Romanian leu gained a quarter or a percent. Corporate wages in Poland surged 6.5 percent in November from a year earlier, data showed on Monday, although that was below analysts' forecast of 7.1 percent. The European Commission on Wednesday may trigger a so-called "Article 7" procedure against Warsaw over Poland's planned overhaul of its judiciary. That would bring Poland one step closer to losing its voting right in the EU, but any financial consequence remained a remote risk, BZ WBK analysts said in a note. 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. percent from Friday. The rating upgrades should nudge Serbia's central bank towards cutting the region's highest interest rates further, the bank's former governor, Dejan Soskic, told the N1 television channel. "Another and perhaps more important factor was payment of VAT by companies which was on Friday and that boosted demand for the dinar," one Belgrade-based dealer said. In equity markets, a 4 percent jump in Polish copper producer KGHM helped Warsaw's blue-chip index rise by more than one percent. In Budapest, drugmaker Richter gained 2.3 percent after good drug trial results.

CEE MARKETS SNAPSH AT 1456 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.680 25.675 -0.02% 5.17% 0 5 Hungary 313.57 314.02 +0.15 -1.51% forint 00 50 % Polish zloty 4.2075 4.2110 +0.08 4.67%

%

Romanian leu 4.6195 4.6308 +0.24 -1.83%

%

Croatian 7.5435 7.5465 +0.04 0.15% kuna % Serbian 118.80 118.65 -0.13% 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 1067.1 1062.0 +0.48 +15.7 6 5 % 9% Budapest 38675. 38657. +0.05 +20.8 40 37 % 5% Warsaw 2438.5 2416.9 +0.89 +25.1 3 5 % 9% Bucharest 7667.3 7603.3 +0.84 +8.22 1 1 % % Ljubljana 792.17 793.01 -0.11% +10.3

9%

Zagreb 1845.6 1859.3 -0.74% -7.48% 7 4 Belgrade 746.43 743.52 +0.39 +4.05 % % Sofia 662.74 664.67 -0.29% +13.0

1% BONDS

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

Republic

2-year 0.343 -0.002 +104b -3bps

ps

5-year 0.722 -0.043 +104b -6bps

ps

10-year 1.462 0.037 +116b +4bps

ps Poland

2-year 1.676 -0.005 +237b -3bps

ps

5-year 2.609 -0.009 +293b -2bps

ps

10-year 3.241 -0.002 +294b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 1.04 1.24 1.39 0

IBOR=>

Hungary <BU 0.03 0.06 0.195 0.03

BOR=>

Poland <WI 1.77 1.81 1.92 1.72

BOR=>

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

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