* Dollar retreat on U.S. vote helps CEE currencies * Polish cbank keep rates on hold, retains loose stance * Crown misses out on firming, hits 5-month low vs forint (Adds Polish central bank decision, rise in Polish bond yields) By Sandor Peto BUDAPEST, Nov 7 (Reuters) - The zloty reached a three-week high against the euro on Wednesday, benefiting from a retreat of the dollar on global markets, even though the Polish central bank (NBP) reaffirmed its loose policy stance.
The dollar fell after significant gains in U.S. midterm elections by the opposition Democrats, giving them the opportunity to block President Donald Trump's agenda, which may result in less economic stimulus.
The prospect of less fiscal stimulus would also relieve the pressure on the Fed to keep raising interest rates, making the premium for holding riskier CEE assets more rewarding.
Meanwhile, the Polish central bank kept its benchmark rate on a hold at a record low 1.5 percent as expected.
It said rising power prices could lift inflation above 2.5 percent, the midpoint of its target range, next year.
But NBP Governor Adam Glapinski reaffirmed that interest rates should remain unchanged until the end of 2019, or possibly longer.
The zloty, Central Europe's most liquid currency, still firmed by 0.4 percent to 4.2886 against the euro by 1635 GMT, benefiting from the selling of the dollar, while the forint and the leu gained 0.1 percent.
The prospect of a less steep rise in U.S. interest rates also boosted stocks globally, including in Central Europe.
Warsaw's bluechip stock index jumped 2.1 percent by 1635 GMT to a five-week high and Budapest's main index rose 1.4 percent to a six-month high, boosted by a 3.4 percent surge in the shares of OTP Bank.
Polish bond yields extended their rise after Glapinski's prediction of unchanged interest rates possibly for years.
The 10-year yield traded at 3.22 percent late in the session, up by 5 basis points from Tuesday.
The Czech crown missed out on the regional currency strengthening, trading slightly weaker at 25.87 versus the euro.
It even touched a 5-month low on its cross with the forint despite four straight interest rate increases by the Czech central bank (CNB), the last one delivered a week ago.
Hungary's central bank, like Poland's, has kept interest rates at record lows.
But the forint is oversold, while investors still hold a huge amount of positions in the crown which they bought before the CNB removed a cap on the currency last year, analysts said.
"While the market positioning still makes the Czech crown vulnerable ... it seems that the market was mostly short in case of the HUF and this is technically positive for the Hungarian currency," said Radomir Jac, Chief Economist of Generali Investment CEE in Prague.
CEE SNAPSHOT AT MARKETS 1735 CET CURRENCI ES Latest Previous Daily Change bid close change in 2018 Czech