PRAGUE: The Czech crown gave back some gains on Friday after reaching a five-year high on Thursday, when the Czech central bank raised interest rates for a third time and signalled another increase this year.
The crown bid 0.3 percent lower at 25.236 to the euro at 1017 GMT, and other central European currencies also edged lower. Bond ticked up in Hungary, tracking core global markets with central banks in major economies sounding more hawkish.
The Czechs started raising rates last August as their fast-growing economy and falling unemployment boosted wages and prices.
The central bank said on Thursday another rate increase in 2018 was probable, although it might not come until the second half of the year, a less aggressive view than some market players had expected.
Analysts said the bank's new outlook on the crown - seeing it at 24.9 to the euro this year - supported the currency. However, investors are still without a clear path, limiting gains.
"If the EURCZK drops below 25 in February ... it would lower the chance for the next hike in the CNB_s policy rate unless there is a quick upward move in the consensus for euro area GDP or unless we see a higher chance of earlier ECB interest rate tightening," Citibank said.
The European Central Bank plans to maintain its ultra-loose policy until at least September. The euro zone's economic revival and expectations of monetary tightening have made the euro more attractive, boosting central European assets as well.
"An expected rise in the EURUSD should translate into a short term fall of the EURPLN rate," ING Bank Slaski in Warsaw said in a note.
On Friday, the Polish zloty and Hungary's forint lost 0.2 percent. The Romanian leu traded sideways.
Hungarian yields rose 3 to 6 basis points. The central bank's interest rate swap tender on Thursday, part of measures announced last year to help drive bond yields lower, has not stopped the rise, a fixed income trader said.
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