BUDAPEST: Central European currencies mostly retreated on Tuesday from their two-month highs after hitting technical barriers and running into worries about other emerging markets.
The region's main currencies had reached their strongest levels since February on Monday, even though Hungary and Poland are keeping interest rates lows while the Czech and Romanian central banks have started to raise them.
The leu shed 0.2 percent to 4.6485 against the euro after surging on Monday, when the Romanian central bank took steps to drain market liquidity through a long-unused deposit facility.
The central bank may keep monetary conditions tight or even raise its benchmark rate, after annual inflation rose to a five-year high in March, analysts have said.
Long-term Romanian government bond yields were mixed, not tracking a rise in Polish peers. Poland's 10-year yield rose 3 basis points to 3.1075 percent, up from the sub-3 percent levels reached after weeks of decline by late last week.
"When core markets start to weaken, the domestic (Polish) yields will be rising faster than the US ones," BZ WBK analysts said in a note.
The zloty weakened to 4.1585 per euro and the forint to 310.60, both down 0.1 percent but remaining near their two-month highs.
The forint's weakening may have been caused by its retreat from the resistance line of 250 to the dollar, one Budapest-based trader said.
Investors were also watching the National Bank of Hungary (NBH), which may not want the forint to return to the firmer side of 310, market participants said.
That may be indicated by a slight increase in market liquidity after a NBH swap tender on Monday, Raiffeisen analyst Gergely Palffy said in a note.
"The NBH has been micro-managing the exchange rate through a range of unconventional measures for years and is expected to continue to keep the EUR/HUF spot and implied volatility as stable as possible in the future as well," he said, adding that a range of 310-315 was likely in the coming months.
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