BUDAPEST/WARSAW: The zloty was steady on Wednesday, shrugging off an unprecedented move by the European Commission to suspend Poland's European Union voting rights.
That process, aimed at penalising Warsaw for judicial reforms the EU executive says threaten the rule of law, can take effect only if all other EU states approve it.
The zloty dipped to 4.2095 versus the euro but rebounded to 4.1995 by 1350 GMT after Hungary said it would veto the Commission's action.
The currency's swings were small as neither the EU decision nor Hungary's intention to derail was a surprise.
Robust economic growth and expectations for monetary tightening are expected to strengthen some of the region's currencies including the zloty next year.
The leu, which shed 0.2 percent against the euro to 4.629, is an exception.
Concerns that Romania's economy may overheat and that a judicial overhaul there could block a fight against corruption have kept a lid on the currency. Lawmakers passed part of the reform on Tuesday and are expected to approve the rest late on Wednesday.
Regional stock markets also brushed off political developments.
Bucharest's main index firmed 0.6 percent to a two-week high and Warsaw tested three-week highs.
The Czech index set a six-year high, supported by further progress towards a US tax overhaul.
Expectations for tax stimulus in the world's biggest economy have buoyed stock prices in the European Union's fast-growing emerging markets in the past weeks.
The region's bourses did not track a pullback from record highs in Wall Street, which also made German stocks retreat.
"But you can feel the uncertainty," said Jozsef Miro, strategist of Erste in Budapest.
"In the past, (European and US) stock markets had their own ways. Germany starting to correlate with Wall Street may not be a good sign."
The Czech crown firmed 0.2 percent to 25.65 against the euro.
The Czech central bank is seen keeping its interest rates on hold on Thursday, but it could maintain hawkish rhetoric after two hikes since August, and raise rates again in the first quarter of 2018, according to a Reuters poll of analysts.
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