CEE MARKETS-Markets jump on Fed comments, Czech crown gives up gains

BUDAPEST/PRAGUE, Jan 31 (Reuters) - Central European markets firmed across the board after the Federal Reserve signalled that its interest rate hike cycle may have ended. The prospect of lower than expected U.S. interest rates made risky assets more attractive and also caused some selling of the dollar whose strength weighed on financial assets in emerging markets last year. The forint hit its strongest levels since May last year at 315.03 against the euro in overnight international trade. The forint retreated to 315.85 by 0919 GMT as the euro gave up ground against the dollar, still slightly firmer from Tuesday's domestic close before the Fed's comments. The zloty touched a 5-week high at 4.2788 against the euro, before retreating to 4.2804, still up by 0.2 percent. The leu drifted further away from record lows hit last week in response to worries over the government's new tax on banks. It traded at 4.738, up a quarter of a percent. "There has been a bit of panic over the past days and now it seems that some foreign players have begun ... to throw back some euros into the market ... but nobody can estimate how long will it last," said a dealer with a foreign bank in Bucharest. Another trader said trading volumes were "pretty large". The Czech crown jumped in early trade from a one-month low set on Tuesday, but soon gave up most of its gain, to trade at 25.777. Czech central bank Governor Jiri Rusnok said on Czech television late on Wednesday that the bank could deliver between zero and two interest rate hikes this year. One Prague-based dealer said the crown was choppy because the latest comments from Czech central bankers left the market unsure about the rate hikes priced in earlier. "At the beginning of the year it was sure (of a rate hike)," the dealer said. "Now it is different. Nobody on the market is 100 percent persuaded of what will happen." In the region's equity markets, Bucharest led a rise, with its bluechip index gaining 0.7 percent. Poland's 10-year government bond yield dropped 4 basis points to below 2.73 percent, near 2-and-1/2-year high territory below 2.707 percent. Hungary's 10-year yield dropped 9 basis points from Wednesday's fixing to 2.75 percent, and traders projected that Thursday's Hungarian government bond auctions would draw strong demand. "The international environment helps bonds," one Budapest-based trader said. "The Hungarian central bank's envisaged tightening means it would fight inflation ... This is a win-win situation for long-term bonds," the trader added.

CEE SNAPSHOT AT MARKETS 1019 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2019 Czech <EURCZK= 25.7770 25.7900 +0.05% -0.27% crown > Hungary <EURHUF= 315.8500 315.9700 +0.04% +1.66% forint > Polish <EURPLN= 4.2804 4.2884 +0.19% +0.21% zloty > Romanian <EURRON= 4.7380 4.7505 +0.26% -1.77% leu > Croatian <EURHRK= 7.4195 7.4220 +0.03% -0.13% kuna > Serbian <EURRSD= 118.3700 118.4500 +0.07% -0.06% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2019 Prague 1039.81 1034.950 +0.47% +5.40%

0

Budapest 41031.15 40862.97 +0.41% +4.83% Warsaw 2371.06 2357.79 +0.56% +4.15% Bucharest 7096.11 7043.64 +0.74% -3.89% Ljubljana <.SBITOP 839.84 840.38 -0.06% +4.42% > Zagreb 1761.81 1762.17 -0.02% +0.74% Belgrade <.BELEX1 698.55 699.87 -0.19% -8.29%

5>

Sofia 583.15 575.27 +1.37% -1.90%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.7260 -0.0040 +228bps -1bps

R>

5-year <CZ5YT=R 1.6250 -0.0640 +196bps -6bps

R>

10-year <CZ10YT= 1.7630 -0.0220 +159bps -1bps

RR> Poland

2-year <PL2YT=R 1.4830 -0.0180 +204bps -3bps

R>

5-year <PL5YT=R 2.1390 -0.0360 +247bps -4bps

R>

10-year <PL10YT= 2.7280 -0.0430 +256bps -3bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.07 2.11 2.13 1.99

<PRIBOR=

>

Hungary 0.33 0.53 0.75 0.15 Poland 1.73 1.72 1.72 1.72

Note: FRA are for ask prices quotes

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(Additional reporting by Radu Marinas in Bucharest. Editing by Jane Merriman)