BUDAPEST: Central European currencies mostly extended gains on Tuesday on the region's reasonably good growth prospects, but flat to weaker government bonds indicated uncertainty about Greece's talks with creditors and ahead of US jobs data late this week.
Hungary's forint and the Polish zloty had both firmed 0.2 percent against the euro by 0815 GMT.
The zloty jumped more than one percent on Monday after purchasing manager surveys for the region showed that Poland's economic activity outperformed last month even though it slowed slightly.
The surveys indicated that while manufacturing growth slowed in the region it did not undermine the positive growth outlook.
Investors, however, remain on edge after a jump in Bund yields in the past week, which could indicate that interest in Central Europe's high-yielding bond markets may decline too.
Central European bonds could also become relatively less attractive if US payrolls data on Friday spurs expectations for a US interest rate rise earlier rather than late this year.
"New yield highs on core markets may not be favorable for the zloty," mBank analysts said in a note.
Raiffeisen said in a note that "benign economic data from the US could fuel additional exchange rate weakening in CE (Central Europe) during the coming weeks as rate hike speculations in the US could intensify".
Polish government bonds moved sideways, with the 10-year paper trading at a yield of 2.62 percent. Czech yields ticked up, with the 10-year yield rising for a fourth straight day to above 0.6 percent, the highest since March 10.
The Polish and the Romanian central banks are expected to keep their interest rates on hold at record lows at their meetings on Wednesday.
Poland said in March that its rate cuts were over. That,
coupled with solid economic growth, gave fuel to a firming of the zloty. Other central banks in the region, including Hungary and Romania, are expected to loosen monetary policy further.
The Romanian leu, trading steady at 4.427 against the euro, could remain flat with a weakening bias, ING Bank analysts in Bucharest said in a note.
"However, we believe the Greek developments and comments issued later today by the European Commission on Romania (in its spring forecasts) might have the potential to lead to some headline trading," they said.
Equities mostly firmed slightly in the region, led by Budapest's main index which rose 0.8 percent, driven by a 1.5 percent rise in the shares of pharmaceuticals company Richter to 4,540 forints.
UBS raised its target price for Richter, which has significant business in Russia, to 5,400 forints from 4,300 and recommended investors buy the shares.
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