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CEE MARKETS-Crown creeps higher after Czech bank retains neutral outlook

Sandor Peto and Robert Muller

* Czech central bank keeps rates on hold, retains neutral stance

* Crown bucks easing of forint and zloty on dollar rebound

* Crown is off 9-month highs reached on technical factors

* Dovish ECB signals play key role in CEE central bank decisions

(Recasts, with Czech central bank decision and comments) BUDAPEST/PRAGUE, June 26 (Reuters) - The crown bucked a weakening of other Central European currencies on Wednesday as the Czech central bank retained its neutral rate outlook, not following recent dovish signals from the U.S. Federal Reserve and the European Central Bank. The forint and the zloty shed 0.2% against the euro by 1330 GMT. They weakened as investors bought the dollar after a Federal Reserve official tempered expectations for aggressive monetary easing. Earlier expectations for deeper Fed rate cuts and last week's dovish comments from the European Central Bank were positive for currencies in Central Europe. Some market participants had expected dovish signals from the Czech central bank (CNB) at a news conference after a meeting on Wednesday. Governor Jiri Rusnok said the CNB continued to watch signals from abroad, but said rates could stay unchanged for a relatively long period and that the bank's stance was neutral.

One of the seven rate setters even voted for a rate rise. The crown traded at 25.47 to the euro, a tad firmer than Tuesday's close but still near a nine-month high of 25.435 reached late on Tuesday. Domestic factors pushed some central banks in the region into tighter policies as economies in the region grow faster than euro zone peers, and strong wage growth has boosted consumer prices. Dovish policy signals from the ECB, however, suggest that prices of imports from the euro zone could slow and help moderate inflation pressure in Central Europe. The National Bank of Hungary (NBH) cited those signals after its meeting on Tuesday as a justification for keeping rates on hold despite a rise in annual inflation to near the top of its 2-4% target range, while it said it would continue to watch incoming economic data. Some liquidity tightening by the bank and a hike in its -0.05% overnight interest rate into positive territory remains likely in September, KBC analysts said in a note. "It is quite clear that the NBH's next move will be even more dependent on the ECB's action and they want to keep the low interest environment as long as possible," they said. Hungary's 10-year government bond yield was fixed 5 basis points higher at 2.66%, reflecting a smaller rise in the corresponding U.S. and German yields.

CEE SNAPSHOT ATMARKETS 1530 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.4700 25.4780 +0.03% +0.93%crown >Hungary <EURHUF= 323.6000 322.9500 -0.20% -0.78%forint >Polish <EURPLN= 4.2626 4.2545 -0.19% +0.63%zloty >Romanian <EURRON= 4.7235 4.7199 -0.08% -1.47%leu >Croatian <EURHRK= 7.3950 7.3975 +0.03% +0.20%kuna >Serbian <EURRSD= 117.7600 117.8400 +0.07% +0.46%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1034.14 1040.050 -0.57% +4.82%

0

Budapest 40221.19 40061.95 +0.40% +2.77%Warsaw 2314.66 2303.31 +0.49% +1.67%Bucharest 8655.51 8594.90 +0.71% +17.22%Ljubljana <.SBITOP 887.83 890.23 -0.27% +10.39%>Zagreb 1902.38 1905.02 -0.14% +8.78%Belgrade <.BELEX1 724.06 722.28 +0.25% -4.94%

5>

Sofia 576.77 575.34 +0.25% -2.98%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.5490 0.0760 +229bps +8bps

R>

5-year <CZ5YT=R 1.3540 0.0600 +201bps +5bps

R>

10-year <CZ10YT= 1.5210 -0.0250 +184bps -4bps

RR> Poland

2-year <PL2YT=R 1.5790 0.0070 +232bps +1bps

R>

5-year <PL5YT=R 1.9420 0.0130 +259bps +0bps

R>

10-year <PL10YT= 2.3540 0.0360 +268bps +3bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.17 2.06 1.96 2.17

<PRIBOR=

>

Hungary 0.32 0.43 0.54 0.25Poland 1.73 1.73 1.71 1.72

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto Editing by Alexandra Hudson and Susan Fenton)