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CEE MARKETS-Forint sets new 8-month high, CEE investors watch Fed

Sandor Peto

* Forint sets new 8-month high, CEE assets are mostly rangebound

* Investors wait to see if the Fed indeed turned less hawkish

BUDAPEST, Jan 30 (Reuters) - The forint touched an 8-month high against the euro on Wednesday as expectations for upcoming monetary tightening remained intact after Tuesday's Hungarian central bank (NBH) meeting. The rise had little momentum as investors held their breath before the U.S. Federal Reserve's meeting. Stocks and other currencies in the region were mostly rangebound. The forint hit 317.04 versus the euro, marginally firmer than Tuesday, and re-tested Tuesday's 8-month highs versus the zloty. The NBH did not provide clues about the timing of an expected forint liquidity tightening after its Tuesday meeting, but reiterated its commitment to a "gradual and cautious" policy normalisation. In contrast with Hungary, where core inflation has been rising, Poland's inflation has remained below the central bank's target range of 1.5-3.5 percent. The zloty was a touch weaker, trading at 4.2954 against the euro. If the Federal Reserve signals less future monetary tightening than in December, a possible dollar weakening would be positive for the zloty, Warsaw-based Santander bank analysts said in a note. Rallies in the dollar last year often caused a currency sell-off in emerging markets including Central Europe. A looser stance in the Fed's comments would mean an improved backdrop for Central European government debt, analysts said. "That being said, local monetary policy ... drivers should continue gaining in importance, as witnessed for example in Hungary yesterday," Raiffeisen analyst Stephan Imre said in a note. Hungarian government bond yields rose slightly from Tuesday's fixing. The 10-year yield was up 2 basis points at 2.85 percent, back at Monday's levels. Polish bonds were treading water and could benefit from the Fed's comments if they are not hawkish, the Santander note said. Investors in Romania watched the finance ministry which may publish its draft 2019 budget on Wednesday. "With the latest fiscal initiatives including banking asset taxation and growing disagreements between the government and the central bank it may be worth to expect more taps of international markets this year," the Raiffeisen note said. "In our opinion the rejection of market bids in ROMGB auctions (in the past weeks) sharply increases the chance of international Eurobond placement in Q1," it added.

CEE SNAPSHOT ATMARKETS 1056 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.7950 25.7810 -0.05% -0.34%crown >Hungary <EURHUF= 317.1000 317.1500 +0.02% +1.26%forint >Polish <EURPLN= 4.2954 4.2943 -0.03% -0.14%zloty >Romanian <EURRON= 4.7550 4.7578 +0.06% -2.12%leu >Croatian <EURHRK= 7.4210 7.4235 +0.03% -0.15%kuna >Serbian <EURRSD= 118.3100 118.4500 +0.12% -0.01%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1031.56 1029.600 +0.19% +4.56%

0

Budapest 40951.42 41146.00 -0.47% +4.63%Warsaw 2372.07 2373.30 -0.05% +4.19%Bucharest 6988.08 6948.96 +0.56% -5.36%Ljubljana <.SBITOP 839.12 838.28 +0.10% +4.33%>Zagreb 1761.51 1758.02 +0.20% +0.73%Belgrade <.BELEX1 699.74 698.73 +0.14% -8.13%

5>

Sofia 570.69 573.66 -0.52% -4.00%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.8720 0.1390 +244bps +13bps

R>

5-year <CZ5YT=R 1.6300 -0.0430 +195bps -5bps

R>

10-year <CZ10YT= 1.7770 -0.0080 +158bps -1bps

RR> Poland

2-year <PL2YT=R 1.4940 -0.0170 +206bps -3bps

R>

5-year <PL5YT=R 2.1670 -0.0130 +249bps -2bps

R>

10-year <PL10YT= 2.7970 0.0190 +260bps +1bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.07 2.11 2.14 2.00

<PRIBOR=

>

Hungary 0.34 0.61 0.84 0.00Poland 1.72 1.72 1.72 1.72

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto Editing by Andrew Heavens)