BUDAPEST/BUCHAREST: The zloty approached a four-month high against the euro as Central European assets mostly rose on Wednesday, lifted by comments made by Federal Reserve chief Janet Yellen on Tuesday.
Yellen said caution was needed in raising interest rates, and the prospect of fewer increases in the US made assets in the European Union's fast-growing, stable emerging markets more attractive.
"I would not call the impact strong - (government bond) yields are lower by 1 to 2 basis points - and investors still wait for US non-farm payroll data," one Budapest-based fixed income trader said. The US jobs report is due on Friday.
The zloty reached a three-month high of 4.24 against the euro and was near its strongest since November. At 0842 GMT, it traded at 4.244, firmer by 0.2 percent.
The forint strengthened by 0.24 percent to 313.50, but expectations the Hungarian central bank will cut rates further, after last week's surprise reduction, could keep it nearer the top of the 310-315 range.
"Whereas the central bank will likely take appropriate steps to keep the forint from appreciating, the possible rating improvements and the good fundamentals should prevent noteworthy depreciation in our view," Raiffeisen said in a note.
Junk-rated Hungary's 10-year bond yields can also drop below much better-rated Poland's levels, following the belly and the short end of the yield curve, Raiffeisen said.
A Reuters poll showed last week forecast the two countries' long-term yields would rise in tandem in the next year, partly tracking a likely rise in US Treasuries yields.
Hungary's 10-year yield dropped 4 basis points on Thursday from the previous session's fixing, to 2.88 percent. Poland's corresponding yield fell 3 basis points to 2.826 percent.
Comparable yields rose by a few basis points in the Czech Republic and Romania. Their central banks will meet on Thursday and are expected to keep rates on hold.
"No change in rates is expected after recent remarks (from Czech central bankers) against the (possible cuts to) negative rates but worth watching whether further depricing of a cut would be on cards or not," said Dalimil Vyskovsky, rates trader at Comerci Bank.
Budapest led a rise in equities, with its main index rising 1.7 percent. Bucharest's flat index continued to underperform the region's main markets.
"We're witnessing a larger correction after last year's rally. In other CEE markets, especially in Poland, the larger corrections had taken place last year," one Bucharest-based analyst said.
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