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CEE MARKETS-Forint, region's assets steady as Hungary expected to hold rates

* Hungarian central bank seen holding rates
    * Rate setters waiting for signs of faster growth
    * Czech 2-year bond yield touches 3-month high

    By Sandor Peto
    BUDAPEST, Jan 24 (Reuters) - The forint was flat against the
euro and Central European assets were also steady on Tuesday
before of a Hungarian central bank meeting at which it is
expected to keep its base rate on hold at a record low.
    Hungary's central bank is seen keeping its policy unchanged
all this year. Although inflation is on the rise in Central
Europe after years of stagnation or decline, the region's
central banks are expected to wait for more signs of
accelerating economic growth before following the tightening
policy of the U.S. Federal Reserve.
    However, analysts and traders say that as the most dovish in
Central Europe, the Hungarian central bank will be the last to
follow the Fed's example.
    In Poland, central bank rate setters "do not categorically
rule out the interest rate hikes this year", Raiffeisen analysts
 said in a note.
    One of the most dovish Polish rate setters, Jerzy Zyzynski,
told Reuters late last week that the Polish central bank would
need to consider raising rates if inflation reached its target
and the economy overheated. 
    However, investors may watch if Hungary's central bank
indicates possible future tightening via unconventional tools. 
    The bank has boosted liquidity in local markets for months
with measures including a limit on the amount of 3-month
deposits that commercial banks can place with it, and holding
liquidity tenders. But it is unlikely to signal any changes on
this front on Tuesday.
    "Its loose policy continued to keep short-term market
interest rates low, while it is no longer able to influence
long-term yields which still do not have much upside as the
curve has got too steep," one Budapest-based trader said.
    "Relative to the looseness of policy, the forint is quite
strong," the trader added.
    The forint  and the zloty were a shade
weaker against the euro at 0931 GMT.
    The forint traded at 310.10, off 3-week lows touched on
Monday.
    Government bond yields were flat across the region apart
from Prague where the 2-year yield rose 14 basis points to a
3-month high of -0.609 percent.
    A buying frenzy in Czech markets has subsided in the past
week after rate setters said a cap on the crown,
introduced in 2013 to keep it below 27 against the euro, was
unlikely to be scrapped before the second half of 2017.
    Rate setters have said the crown was overbought by investors
when the central bank bought almost 10 billion euros to keep the
crown below the cap in the first 10 days of the year.
    A rise in inflation and a Czech economic recovery are seen
allowing the bank to abandon the cap.
    January figures published on Tuesday showed a rise in Czech
consumer confidence, but a drop in business confidence.
 

    
              CEE        SNAPS   AT  1031          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.02   +0.0  -0.07
                            60     85     1%      %
 Hungary                 310.1  309.9  -0.05  -0.41
 forint                    000    300      %      %
 Polish                  4.372  4.370  -0.04  0.73%
 zloty                       0      1      %  
 Romanian                4.502  4.502   +0.0  0.73%
 leu                         2      4     0%  
 Croatian                7.505  7.505   +0.0  0.67%
 kuna                        0      5     1%  
 Serbian                 123.8  124.0   +0.1  -0.40
 dinar                     500    000     2%      %
 Note: daily  calculate  previ  close  1800        
 change       d from     ous    at     CET    
                         STOCK                     
                         S                    
                         Lates  Previ  Daily  Chang
                         t      ous           e
                                close  chang  in
                                       e      2017
 Prague                  926.9  926.7   +0.0   +0.5
                             9      9     2%     8%
 Budapest                32814  32906  -0.28   +2.5
                           .42    .48      %     4%
 Warsaw                  1998.  1991.   +0.3   +2.6
                            94     36     8%     2%
 Ljubljana               735.9  737.4  -0.20   +2.5
                             4      5      %     6%
 Zagreb                  2096.  2092.   +0.1   +5.0
                            06     50     7%     7%
 Belgrade     <.BELEX15  700.0  700.9  -0.12  -2.41
              >              5      1      %      %
 Sofia                   607.9  605.2   +0.4   +3.6
                             5      2     5%     7%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.60  0.143   +006   +13b
              >              9           bps     ps
   5-year     <CZ5YT=RR  -0.21  -0.05   +022  -7bps
              >              9      8    bps  
   10-year    <CZ10YT=R  0.456      0   +007  -2bps
              R>                         bps  
 Poland                                            
   2-year     <PL2YT=RR  1.995  0.003   +267  -1bps
              >                          bps  
   5-year     <PL5YT=RR  2.946  0.003   +338  -1bps
              >                          bps  
   10-year    <PL10YT=R  3.697  0.008   +332  -1bps
              R>                         bps  
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.23   0.24   0.23      0
              PRIBOR=>                        
 Hungary              <   0.29   0.37   0.47   0.27
              BUBOR=>                         
 Poland               <  1.765  1.815  1.895   1.73
              WIBOR=>                         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
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 (Editing by Raissa Kasolowsky)
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