CEE MARKETS-Forint slips as dovish Hungarian central bank eyed for guidance

PRAGUE, Dec 17 (Reuters) - The forint fell 0.4% on Tuesday, weakening beyond a key level against the euro, with investors on alert for potential changes to the Hungarian central bank's unconventional policy toolkit. Other central European currencies also dropped, although the forint led losses, while stock markets were mixed. Hungary's central bank, the most dovish in the region, is expected to keep interest rates on hold on Tuesday, with a poll seeing hardly any tightening through to the end of 2021. But two central bank sources told Reuters on Friday that the bank planned to extend its 300 billion forint ($989 million) program to buy corporate bonds that it launched in July, with a decision possibly as soon as Tuesday. "Hungarys central bank will probably keep interest rates unchanged, with investors focusing on potential tweaks to the unconventional monetary toolkit and updated economic forecasts," brokerage Equilor said in a note. Those expectations helped push the forint down to 330.55 to the euro, past the psychological 330 level which it breached last week. The bank will hold a news conference at 1430 GMT after the rate decision. Central Europe's monetary policymakers have been stuck in a holding pattern for several months even as the European Central Bank and others ease policy to shore up sagging economies. Last month, Hungary's central bank reiterated its view that dampening European economic activity would keep a lid on domestic price pressures. The Czech central bank meets on Wednesday and is also seen holding steady on policy despite a continuing debate on whether another rate hike is needed to keep inflationary pressures under control. The crown dipped 0.15% to 25.484 to the euro, with forward markets pretty much pricing out chances of a rate cut in the next year. Romania's leu eased less than 0.1%. Poland's zloty was down 0.05% with markets keeping an eye out later in the day for the energy regulator's decision on 2020 electricity prices. "The likely increase in electricity prices will be one of the factors driving next year's inflation, and thus may affect some members of the Monetary Policy Council and, indirectly, the valuation of domestic assets," Bank Millennium said.










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(Reporting by Jason Hovet in Prague, Krisztina Than in Budapest, Alan Charlish in Warsaw and Radu Marinas in Bucharest; Editing by Kirsten Donovan)