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CEE MARKETS-Zloty eases further on Fed, regional politics ignored

* Zloty sets new 4-month low, Fed seen signalling further hikes

* Poland's tension with Brussels, Berlin flares up

* Global developments overshadow domestic politics in markets

BUDAPEST/WARSAW, March 21 (Reuters) - The zloty led a weakening of Central European currencies due to fears that the U.S. Federal Reserve will issue hawkish comments after its meeting on Wednesday. The zloty set a 4-month low against the euro, trading at 4.2378 at 0917 GMT, down 0.2 percent from Tuesday. While the economic data flow in the region continues to show robust growth, political jitters help to keep sentiment uneasy. But the main cause of the current asset weakness is a likely rise in Fed interest rates which makes dollar assets relatively more attractive, market participants said. "We do not exclude a stronger fall in prices in case the risk of a faster normalisation of interest rates in the United States increases," Bank Pekao analysts said in a note. Global politics, like the threat of a trade war between the United States and its partners, also overshadow local developments, said Monika Kiss, analyst of the brokerage Equilor in Budapest. "In such risker periods, market liquidity dries up... wait, wait, sell -- this is what investors do," she said. The European Commission dismissed Poland's latest defence of controversial court reforms on Tuesday, paving the way for more clashes with Warsaw. Poland's Central European ally, Hungary has pledged to block a procedure to strip Warsaw of its voting rights in the EU. But the region's states, which also criticize the immigration policies backed by Western EU members as too generous, risk losing some funding provided by wealthy net EU payers. Foreign Minister Jacek Czaputowicz said Poland would look into ways of getting compensation for its destruction during World War Two when it was invaded by Germany and Russia.

The forint was steady at 311.58 against the euro, and Budapest stocks moved little. The surprise defeat of Hungarian ruling party Fidesz at a mayoral by-election last month caused some nervousness in markets, but opinion polls show that the party leads by a wide margin ahead of parliamentary elections on April 8. Markets also shrugged off in the past week the resignation of the Slovenian and Slovakian prime ministers, and a request from Slovenian central bank governor Bostjan Jazbec for police protection after he received anonymous threats. The leader of Romania's ruling Social Democrats Liviu Dragnea is due to testify on Wednesday in an ongoing trial in which he stands accused of abuse of office. The leu eased a shade to 4.6677 against the leu. Czech telecoms O2 shares fell 1 percent, after its controlling owner, Czech billionaire Petr Kellner's investment firm PPF Group agreed to buy Norwegian telecoms firm Telenor's businesses in Central and Eastern Europe.

CEE SNAPSHOT AT MARKETS 1017 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.4300 25.4180 -0.05% +0.44% crown > Hungary <EURHUF= 311.5800 311.5900 +0.00% -0.21% forint > Polish <EURPLN= 4.2378 4.2301 -0.18% -1.45% zloty > Romanian <EURRON= 4.6677 4.6665 -0.03% +0.26% leu > Croatian EURHRK= 7.4380 7.4400 +0.03% -0.10% kuna > Serbian <EURRSD= 118.6500 118.4800 -0.14% -0.13% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1126.42 1120.780 +0.50% +4.48%

0

Budapest 37944.91 37954.29 -0.02% -3.64% Warsaw 2274.13 2272.09 +0.09% -7.60% Bucharest 8750.95 8731.99 +0.22% +12.86% Ljubljana <.SBITOP 822.42 821.92 +0.06% +1.99% > Zagreb 1840.23 1843.37 -0.17% -0.14% Belgrade <.BELEX1 754.23 755.53 -0.17% -0.73%

5>

Sofia 664.89 660.72 +0.63% -1.85%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 0.8820 0.0320 +145bps +2bps

R>

5-year <CZ5YT=R 1.3430 0.0060 +137bps +0bps

R>

10-year <CZ10YT= 1.9680 0.0120 +138bps +0bps

RR> Poland

2-year <PL2YT=R 1.5650 0.0040 +213bps +0bps

R>

5-year <PL5YT=R 2.5010 0.0330 +252bps +2bps

R>

10-year <PL10YT= 3.3600 0.0370 +277bps +3bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 0.96 1.08 1.24 0.90

<PRIBOR=

>

Hungary 0.07 0.10 0.18 0.03 Poland 1.74 1.76 1.78 1.70

Note: FRA are for ask prices quotes

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(Additional reporting by Jason Hovet and Robert Muller in Prague)