BUDAPEST: The forint hit a two-week low against the euro and long-term Hungarian government bond yields rose before a central bank meeting expected to cut interest rates further to record lows.
Elsewhere in Central Europe, pressure eased on the zloty which often moves in the opposite direction to the forint when risk appetite is not the dominant factor on international markets.
The forint eased 0.1 percent against the euro by 0753 GMT to 312.15.
The zloty gained 0.4 percent to 4.398. It returned to the firm side of the 4.4 psychological level from Monday's 11-week lows, also rebounding from two-month lows against the forint.
Polish government bond yields were flat, while Hungarian medium- and long-term yields rose.
Polish assets have came under pressure in past weeks from worry that Moody's will downgrade Poland's credit rating in May, concerns that a planned conversion of Swiss franc loans will hurt banks, and the risk of monetary policy easing in Warsaw.
The pressure eased on Tuesday, partly due to hopes for dovish comments from the US Federal Reserve's meeting on Tuesday and Wednesday, which could help Central European assets stay attractive, Pekao analysts said in a note.
The Fed is expected to keep rates on hold and markets are pricing in just a one-in-five chance of a rate hike in June.
But in Hungary, the expected local rate cuts highlight the risk of hawkish Fed comments about the outlook, traders said.
In a Reuters poll of 21 participants last week, 19 analysts projected a 15 basis point cut in the central bank base rate at the meeting, and the poll projected later cuts to 0.75 percent.
The past two weeks' regional trend of yield curve steepening continued in Hungary. Its 10-year government bond yields rose 6 basis points from Monday's fixing to 3.06 percent, the 5-year yield rose 3 basis points to 2.05 percent, while short-term yields remained flat.
"If the base rate goes down to 0.9 or even 0.6 percent, sooner or later the forint will weaken and that can push inflation higher, that is the theory" one Budapest-based dealer said.
A bigger-than-expected rate cut in Hungary could have spillover impacts in neighbouring Romania and weaken the leu towards 4.49 against the euro, ING analysts said in a note.
The leu trade flat at 4.484.
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