Currencies weaken as concerns over war in Ukraine weigh

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BUDAPEST, March 10 (Reuters) - Central European currencies weakened on Thursday in illiquid trade, giving up some of their hefty gains from the previous session as news on the war in Ukraine continued to weigh on market mood in the region.

"Some see yesterday's firming in the CEE as temporary, and not a reversal of recent trends because the general view is that it is still better to be cautious about assets in this region," an FX trader in Budapest said.

Central Europe has been hit hard by the flight to safer assets following Russia's invasion of Ukraine on Feb. 24 that prompted a raft of harsh Western sanctions against Moscow.

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The sharp falls in currencies have already prompted the Czech and Polish central banks to step into the markets and the Hungarian central bank to raise rates.

The National Bank of Hungary raised its one-week deposit rate by 50 basis points to 5.85% at a weekly tender on Thursday, extending its rate tightening campaign. read more

The Hungarian forint weakened 0.53% to 380 per euro.

Elsewhere, the Czech crown eased 0.22% to trade at 25.255 per euro.

February inflation in the Czech Republic hit 11.1% year-on-year, above forecasts, backing expectations for further rate hikes when the Czech National Bank meets this month.

Governor Jiry Rusnok said on Wednesday that if the Czech National Bank raises interest rates at its next policy meeting on March 31, it will be just a small move.

The Polish zloty was down 0.7% on the day and trading at 4.8050 per euro, giving up some gains from Wednesday when central bank Governor Adam Glapinski said the monetary policy council was determined to fight a surge in inflation that will be fuelled by the war in Ukraine. read more

"What we are seeing today is basically profit taking in a very thin and illiquid market," said Piotr Bartkiewicz, an economist at Pekao in Warsaw.

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Additional reporting by Alan Charlish in Warsaw; Editing by Emelia Sithole-Matarise

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