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CEE MARKETS-Dinar, zloty ease as inflation declines across region

* Dinar, zloty ease after a batch of CEE data showing CPI drop

* Poland to release Feb inflation data on Thursday, fall seen

* Serbian inflation decline seen creating appetite for bonds

BUDAPEST, March 13 (Reuters) - Serbia's dinar and the Polish zloty eased on Tuesday as mild inflation readings in Central Europe increased the likelihood that monetary policy in the region will be looser than expected. Serbia released its lowest annual inflation figure since 2016 on Monday. The rate fell to 1.5 percent in February, below the 1.9 percent forecast by analysts. The dinar touched a three-week low and was trading at 118.2 at 0950 GMT, weaker by 0.2 percent. Analysts said the fall in inflation could increase demand for five-year government bonds at an auction on Tuesday. Strong appetite for Serbian debt has helped buoy the dinar in recent weeks, while other currencies in the region have weakened amid concerns over a rise in global inflation and interest rates. The Serbian central bank (NBS) has repeatedly sold the currency to stem its strength. "From an inflation perspective ... a moderate downwards adjustment to the 3.50 percent base rate would be justified," Raiffeisen analyst Stephan Imre said in a note. "However, we assume that NBS will walk the talk and wait for EM/RSD market reaction to the 21 March FOMC meeting." The Polish central bank lowered its inflation forecasts last week, and Governor Adam Glapinski said he saw no reason to start to lift record-low interest rates before the end of 2020, knocking the zloty below the 4.2 percent line against the euro. February inflation figures are due on Thursday, with a drop expected in the annual reading to 1.7 percent in February from 1.9 percent in January. That is weighing on the zloty even though markets are still pricing in a rise in rates next year. The zloty eased 0.1 percent to 4.21 against the euro, near its weakest levels of the past three months. The Czech crown firmed 0.1 percent to 25.435 versus the euro but was still trading near two-month lows. The leu was steady at 4.6616, after Romanian data showed a rise in annual inflation to 4.7 percent in February from 4.3 percent in January. The rate is the highest in the region after a surge in the past year, but the February figure was in line with expectations. Net wages, which fuel inflation, continued to rise robustly in the year to January but slowed to 8 percent from 11.7 percent in December. Erste analysts said in a note dated March 12 that they expected two further Romanian central bank rate hikes this year. "(These will be) data-dependent ... and connected to the decisions of other central banks in the CEE region in order to avoid a high interest rate differential," they added.

CEE SNAPSHOT AT MARKETS 1050 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.4350 25.4630 +0.11% +0.42% crown > Hungary <EURHUF= 311.7500 312.1500 +0.13% -0.27% forint > Polish <EURPLN= 4.2100 4.2059 -0.10% -0.80% zloty > Romanian <EURRON= 4.6616 4.6610 -0.01% +0.39% leu > Croatian <EURHRK= 7.4390 7.4413 +0.03% -0.12% kuna > Serbian <EURRSD= 118.2000 118.0100 -0.16% +0.25% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1130.54 1128.130 +0.21% +4.86%

0

Budapest 38684.10 38822.65 -0.36% -1.76% Warsaw 2376.93 2378.72 -0.08% -3.42% Bucharest 8599.44 8559.15 +0.47% +10.91% Ljubljana <.SBITOP 818.73 818.14 +0.07% +1.53% > Zagreb 1843.80 1844.90 -0.06% +0.05% Belgrade <.BELEX1 740.52 739.38 +0.15% -2.54%

5>

Sofia 679.82 681.36 -0.23% +0.35%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 0.8560 0.0360 +143bps +4bps

R>

5-year <CZ5YT=R 1.2780 -0.0090 +128bps +1bps

R>

10-year <CZ10YT= 1.9460 -0.0070 +133bps +0bps

RR> Poland

2-year <PL2YT=R 1.5800 -0.0030 +215bps +1bps

R>

5-year <PL5YT=R 2.5210 0.0360 +253bps +5bps

R>

10-year <PL10YT= 3.3290 0.0320 +271bps +4bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 0.95 1.06 1.22 0.90

<PRIBOR=

>

Hungary 0.07 0.10 0.18 0.03 Poland 1.75 1.76 1.82 1.71

Note: FRA are for ask prices quotes

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(Additional reporting by Marcin Goettrig in Warsaw Editing by Catherine Evans)