CEE MARKETS-Forint marches back toward its May highs, crown steady as economy stagnates

By Karol Badohal WARSAW, May 30 (Reuters) - Hungary's forint firmed slightly on Tuesday as it continued its advance back to one-year highs, while the crown held steady after data showing the Czech economy stagnated in the first quarter. Currencies were largely drifting as many markets in Europe and the United States returned to action following a Monday holiday. The U.S. dollar's strength has been a key driver for the region in the past month, knocking central Europe's currencies from multi-month or multi-year highs. On Tuesday, a steady dollar gave the forint room to inch higher, as it traded at 370.35 to the euro, up 0.3% on the day and creeping close back to the 368 - its strongest value since April 2022 - touched in mid-May. "I see no market-moving news today that would influence the process of a slow strengthening of the forint thanks to the rate-difference," a Budapest-based trader said. While Hungary's central bank has begun cutting interest rates, starting with a 100 basis point reduction in a one-day deposit rate, its base policy rate still is the highest in the European Union. Central European rate setters were the first in the EU to begin sharp interest rate hikes in 2021. Inflation is still at double-digit rates but already past a peak in the region, leaving investors to bet on the start of rate cuts coming later this year in Poland or the Czech Republic, too. The Czech central bank, though, has continued debate on a possible rate hike. Data on Tuesday, showing the economy stagnated in the first quarter, will likely back those calling for rate stability to continue. "Persistent weakness in household consumption could be an argument against a further rise in interest rates in the bank's debate," Generali Investments CEE's chief economist Radomir Jac said. The crown was little moved at 23.69 per euro, and in Poland, the zloty eased 0.2% to 4.529. Stock markets were also a touch down, following global markets as relief that a possible default by the U.S. government had been averted gave way to concern that a debt ceiling deal could face a rocky path through Congress. Analysts said the dollar's direction, tied to rate hikes in the U.S., would continue to help guide the region's currencies, which were missing a large impulse at the moment. "It seems that at the moment, markets are waiting primarily for inflation data, because they will determine what central banks will do," Bank Pekao economist Piotr Bartkiewicz said. CEE SNAPSHO AT MARKETS T 1153 CET CURRENC IES Latest Previou Daily Change s bid close change in 2023 EURCZK Czech EURHUF Hungary 0 0 EURPLN Polish EURRON Romanian EURRSD Serbian 0 0 Note: calculated from 1800 daily CET change Latest Previou Daily Change s close change in 2023 .PX Prague 1308.23 1313.02 -0.36% +8.86% 00 .BUX Budapest 47378.2 47573.3 -0.41% +8.18% 5 5 .WIG20 Warsaw <.WIG20 1969.41 1980.39 -0.55% +9.90% > .BETI Buchares 12285.5 12297.2 -0.10% +5.33% t 6 8 Spread Daily vs Bund change in Czech spread Republic CZ2YT= 2-year s CZ5YT= 5-year s CZ10YT s Poland PL2YT= 2-year s PL5YT= 5-year s PL10YT s FORWARD 3x6 6x9 9x12 3M interba nk Czech Hungary Poland Note: are for ask FRA prices quotes ******************************************** ****************** (Reporting by Karol Badohal in Warsaw, Jason Hovet in Prague and Boldizsar Gyori in Budapest; Editing by Shweta Agarwal)