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CEE MARKETS-Zloty falls to four-month low on expectations of Fed tightening

* Zloty sets four-month low as U.S. interest rates are seen rising

* Investors looking towards Wednesday's Fed comments

* Foreign investors increase their Hungarian bond holdings

* Regional markets continue to ignore politics

(Adds zloty, comments, Serbian PM's resignation threat) BUDAPEST/WARSAW, March 20 (Reuters) - Central European currencies mostly weakened on Tuesday before a two-day meeting at which the Federal Reserve is expected to raise U.S. interest rates, making assets in emerging markets relatively less attractive. "A rate hike by the Fed on Wednesday looks a done deal. Their comments about the future will be more interesting," one Budapest-based fixed income trader said. The region's most liquid currency, the zloty, led the decline, setting a four-month low against the euro and trading at 4.23 at 1407 GMT. The forint <EURHUF-> fell 0.1 percent. The zloty did not recover even after Polish central banker Eugeniusz Gatnar was quoted as saying that an interest rate increase could be justified in the second half of 2018, because the bank should act pre-emptively to counter inflation risk. . Early this month, the bank lowered its inflation forecasts and its governor, Adam Glapinski, said rates were unlikely to rise before the end of 2020. Unchanged rates would make the zloty less attractive if dollar interest rates rise further. "We believe that the zloty will weaken further as a result of rising expectations for policy tightening by the Fed and the ECB, given the weaker expectations for rates hikes by the National Bank of Poland," ING Bank Slaski said in a note. Government bonds and stocks were mixed in the region. Stocks mostly regained some ground lost on Monday. Budapest's main share index rose 0.4 percent. Figures released in Budapest showed wages continued to grow at double-digit rates in January. The data and retail and industrial output figures released earlier show that annual economic growth may have exceeded 5.5 percent in the first month of the year, Takarekbank analyst Gergely Suppan said in a note. A rise in foreign holdings of Hungarian government bonds this month indicates that they are not particularly concerned about the outcome of Hungary's elections on April 8, the fixed-income trader said. A candidate supported by the opposition won a mayoral by-election late last month in the southern city Hodmezovasarhely. But opinion polls still show the ruling Fidesz party leading by a wide margin, and the main opposition parties failed to forge an alliance at talks in recent days. The dinar hovered around Monday's closing levels, shrugging off a threat from Serbian Prime Minister Ana Brnabic to resign if her colleagues do not put aside "personal vanities" .

CEE SNAPSHOT AT MARKETS 1507 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.4230 25.4370 +0.06% +0.47% crown > Hungary <EURHUF= 311.3500 311.0400 -0.10% -0.14% forint > Polish <EURPLN= 4.2300 4.2190 -0.26% -1.27% zloty > Romanian <EURRON= 4.6660 4.6660 +0.00% +0.29% leu > Croatian <EURHRK= 7.4410 7.4353 -0.08% -0.14% kuna > Serbian <EURRSD= 118.3400 118.2600 -0.07% +0.14% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1122.51 1116.690 +0.52% +4.11%

0

Budapest 37828.02 37689.09 +0.37% -3.93% Warsaw 2259.99 2248.53 +0.51% -8.18% Bucharest 8776.16 8775.38 +0.01% +13.19% Ljubljana <.SBITOP 821.92 825.29 -0.41% +1.93% > Zagreb 1847.63 1847.61 +0.00% +0.26% Belgrade <.BELEX1 755.53 748.51 +0.94% -0.56%

5>

Sofia 658.12 671.80 -2.04% -2.85%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 0.8740 0.0280 +145bps +2bps

R>

5-year <CZ5YT=R 1.3230 0.0520 +135bps +4bps

R>

10-year <CZ10YT= 1.9690 0.0130 +138bps +0bps

RR> Poland

2-year <PL2YT=R 1.5460 0.0170 +212bps +1bps

R>

5-year <PL5YT=R 2.4670 0.0350 +249bps +2bps

R>

10-year <PL10YT= 3.3230 0.0580 +274bps +4bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 0.96 1.07 1.23 0.90

<PRIBOR=

>

Hungary 0.08 0.11 0.18 0.03 Poland 1.72 1.74 1.76 1.70

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto, editing by Larry King)