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CEE MARKETS-Forint finds 7-month high against euro, zloty hit by weak data

Sandor Peto and Alicja Ptak

* Forint sets 7-month high vs euro, 2-month high vs zloty

* Forint buoyed by hawkish comments, weak data weigh on zloty

* Government bond yields continue to rise faster than USTs

BUDAPEST/WARSAW, Jan 18 (Reuters) - The Hungarian forint hit a seven-month high against the euro on Friday and gained against the Polish zloty after data pointed to slower growth in Poland. The forint has rallied since Wednesday when Hungarian central bank (NBH) Deputy Governor Marton Nagy said monetary tightening could start if core inflation reached or exceeded 3 percent, the midpoint of the bank's target range. On Friday the forint touched a 7-month high at 318.7 against the euro, the region's main reference currency. At 1008 GMT it was 0.3 percent higher at 318.92, and up 1.7 percent from a one-month low just before Nagy's comments. Against the zloty it reached a 2-month high, bid at 74.1, as the Polish currency shed 0.1 percent against the euro after weaker-than-expected December industrial output, wages and producer price growth data. The zloty/forint cross is not heavily traded, but its changes indicate divergences in monetary policy expectations. Poland's annual industrial output growth at 2.8 percent was slightly more than half the rate forecast by analysts.

Wages grew by 6.1 percent, less than expected, and the annual industrial producer price index dropped more than expected, to 2.2 percent. "The data on wages will reinforce the MPC's (central bank's) conviction that keeping rates stable is the right thing to do, so the weaker data strengthen the perspective of a long period of stable rates," Piotr Piekos, senior economist at Pekao SA, said. The figures reflect a slowdown from last year's 5 percent growth, but the economy remains too robust to justify a rate cut priced in by markets earlier this week, analysts said. Government bond yields in Warsaw, and also in Budapest and Prague, continued to track this week's rebound in U.S. and German yields, after weeks of decline which was helped by a fall in inflation across the region in the past months. "(The yield rise) is a correction," said Mateusz Milewski, a dealer at mBank. "Earlier a fall in yields was linked to a heavy drop in derivatives. The swap curve had one interest rate cut priced in. Now this move has ended," he added. The yield on Poland's 10-year bonds rose 4 basis points to 2.84 percent, a 9-day high, compared with a 2 basis point rise in the corresponding U.S. Treasury yield. Hungary's 10-year bonds traded at 2.96 percent, off an early peak of 3 percent, but higher by 10 basis points from Thursday's fixing.

CEE SNAPSHOT ATMARKETS 1108 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.5530 25.5420 -0.04% +0.60%crown >Hungary <EURHUF= 318.9200 319.8500 +0.29% +0.68%forint >Polish <EURPLN= 4.2944 4.2890 -0.13% -0.11%zloty >Romanian <EURRON= 4.6950 4.6940 -0.02% -0.87%leu >Croatian <EURHRK= 7.4330 7.4265 -0.09% -0.31%kuna >Serbian <EURRSD= 118.2500 118.3100 +0.05% +0.04%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1018.24 1014.880 +0.33% +3.21%

0

Budapest 41183.83 41180.05 +0.01% +5.22%Warsaw 2372.60 2358.97 +0.58% +4.22%Bucharest 7305.10 7184.84 +1.67% -1.06%Ljubljana <.SBITOP 841.34 835.91 +0.65% +4.61%>Zagreb 1762.21 1756.57 +0.32% +0.77%Belgrade <.BELEX1 698.78 697.56 +0.17% -8.26%

5>

Sofia 567.79 566.77 +0.18% -4.49%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.7480 -0.1980 +233bps -21bps

R>

5-year <CZ5YT=R 1.7740 -0.0080 +207bps -3bps

R>

10-year <CZ10YT= 1.8580 0.0230 +159bps -1bps

RR> Poland

2-year <PL2YT=R 1.4060 0.0140 +199bps +1bps

R>

5-year <PL5YT=R 2.2570 0.0350 +256bps +1bps

R>

10-year <PL10YT= 2.8600 0.0390 +259bps +1bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.15 2.21 2.25 2.01

<PRIBOR=

>

Hungary 0.32 0.60 0.87 0.14Poland 1.73 1.73 1.73 1.72

Note: FRA are for ask prices quotes

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(Additional reporting by Anna Wlodarczak in Warsaw; Editing by Alexander Smith)