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CEE MARKETS-Inflation fall weakens currencies, lifts bonds

* Hungarian, Romanian inflation falls below forecasts * Declining CPIs put pressure on currencies, bond yields * Romania's two-year bond yield is lowest since May By Sandor Peto BUDAPEST, Dec 11 (Reuters) - Central European currencies mostly weakened and government bonds gained after Hungary and Romania reported lower-than-projected inflation, raising the prospect of less monetary policy tightening in the region.

Turmoil over Britain's European Union exit and caution ahead of the European Central Bank's meeting on Thursday kept a lid on activity in markets.

The forint got stuck near its 100-day moving average of 323.4 per euro, little changed from Monday, after the statistics office reported annual inflation slowed to 3.1 percent in November from October's 3.8 percent.

The figure, the lowest since June, was below analysts' 3.5 percent forecast.

Romanian inflation, also released on Tuesday, fell to 3.4 percent, dropping to this year's lowest level from 4.3 percent in October. Forecasts had been for 3.7 percent.

"The Fed and the ECB also seem to turn towards not tightening policy -- we (in Hungary) can forget any rate hike for years now," one Budapest-based currency dealer said.

The Hungarian central bank is widely expected to leave interest rates unchanged at its meeting next week, but some market participants see forint liquidity in interbank markets tightening and short-term market interest rates rising slowly next year.

Views remain split over the future course of Hungarian rates. Some underlying indicators, like a pick-up in services and durable consumer goods inflation, still point towards monetary tightening, ING analyst Peter Virovacz said in a note.

Core inflation, excluding food and fuel prices, was steady at 2.6 percent, below the National Bank of Hungary's 3 percent target.

A retreat in global crude prices in the past two months has reduced inflation rates and pressure on currencies and government debt prices in Central Europe's fast-growing economies.

Polish inflation, reported earlier, was also below expectations. The zloty fell 0.1 percent against the euro, testing the 4.3 line.

Poland's 10-year bond yields struggled to break through 3 percent. Hungarian and Romanian yields dropped further.

Romania's two-year benchmark yield dropped 3 basis points to 3.44 percent, the lowest since May, after a tender of two-year debt drew healthy demand on Monday.

"The below-expectations inflation data for November could re-ignite the buying spree for Romanian government bonds," Bucharest-based ING analyst Ciprian Dascalu said in a note.

Regional stock markets were mixed. A 2.7 percent gain by OTP Bank shares helped Budapest's main index rise 1.4 percent. Prague shed 1.2 percent, mainly because of a fall in Austrian-Based Erste bank's shares.

CEE SNAPSHOT AT MARKETS 1047 CET CURRENCI ES Latest Previous Daily Change bid close change in 2018 Czech Hungary Polish Romanian Croatian Serbian Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2018 Prague 1017.85 1029.110 -1.09% -5.59% 0 Budapest 39770.31 39238.44 +1.36% +1.00% Warsaw 2236.27 2242.10 -0.26% -9.14% Bucharest 8579.33 8558.55 +0.24% +10.65% Ljubljana <.SBITOP 806.35 806.13 +0.03% -0.00% > Zagreb 1711.09 1705.20 +0.35% -7.15% Belgrade <.BELEX1 744.75 741.41 +0.45% -1.98% 5> Sofia 591.92 593.16 -0.21% -12.63% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year 5-year 10-year Poland 2-year 5-year 10-year FORWARD RATE AGREEMEN T 3x6 6x9 9x12 3M interban k Czech Rep 2.13 2.23 2.27 2.01 (PRIBOR= ) Hungary 0.30 0.54 0.84 0.13 Poland 1.75 1.78 1.78 1.72 Note: FRA are for ask prices quotes ************************************************* ************* (Additional reporting by Radu Marinas in Bucharest, editing by Larry King)