CEE MARKETS-Forint rally pauses after rate hike, Fed meeting in focus

By Anita Komuves BUDAPEST, July 28 (Reuters) - The Hungarian forint edged lower on Wednesday, unable to gain further a day after the central bank hiked rates and said that it would take "firm steps" on a monthly basis to rein in higher-than-expected inflation. The National Bank of Hungary (NBH) raised its base rate by 30 basis points to 1.2% on Tuesday, above forecasts, which helped the forint gain more than half a percent and rebound from three-month lows immediately after the decision. However, the currency slid 0.08% to trade at 359.30 per euro on Wednesday as disputes between the Hungarian government and the European Union over pandemic recovery funds kept it under pressure, traders and analysts said. Markets were also assessing how committed the NBH was to its hawkish turn. "There are two reasons behind the forint's lack of strength versus its peers. The market is still doubtful of the central bank's shift in recent months and, second, the increased tensions between some CEE countries and the EU is putting pressure on FX," Morgan Stanley wrote. According to Commerzbank "the main question for the FX market now is how serious MNB's inflation targeting credentials will become over the coming year." The market is also waiting for the result of the U.S. Federal Reserve's meeting due later in the day before deciding on a direction for the forint, two FX traders in Budapest said. Hungarian government bond yields were stable after the rate decision, a fixed-income trader in Budapest said. "The market is still processing what happened, and yields have not moved yet, but I expect some flattening of the curve," he said. Elsewhere, the Czech crown edged up 0.11% to 25.660 per euro, while the Polish zloty slid 0.05% and was trading at 4.5985 versus the common currency. Stocks in the region were mixed, with Warsaw adding 0.83%. Budapest was up 0.46% while Prague gained 0.27%. Bucharest's equities were 0.29% lower. CEE SNAPSHO AT MARKETS T 1048 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 EURPLN= Polish EURRON= Romania EURHRK= Croatia EURRSD= Serbian 0 Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1199.37 1196.150 +0.27% +16.77 0 % .BUX Budapes 47217.4 47002.77 +0.46% +12.14 t 7 % .WIG20 Warsaw 2243.10 2224.59 +0.83% +13.06 % .BETI Buchare 11853.0 11887.90 -0.29% +20.88 st 9 % .SBITOP Ljublja <.SBITOP 1144.41 1140.89 +0.31% +27.04 na > % .CRBEX Zagreb 1934.61 1931.03 +0.19% +11.23 % .BELEX1 Belgrad <.BELEX1 773.96 776.52 -0.33% +3.39% 5 e 5> .SOFIX Sofia 569.51 563.76 +1.02% +27.26 % Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republi c CZ2YT=R s CZ5YT=R s CZ10YT= s Poland PL2YT=R s PL5YT=R s PL10YT= s FORWARD 3x6 6x9 9x12 3M interba nk Czech 1.23 1.56 1.73 0.71 Rep Hungary 1.81 2.09 2.20 1.07 Poland 0.28 0.39 0.50 0.21 Note: are for ask FRA prices quotes ********************************************* ***************** (Additional reporting by Alan Charlish in Warsaw; editing by Uttaresh.V)