BUDAPEST: Central Europe's main currencies extended losses slightly on Thursday as expectations of European Central Bank monetary easing and Federal Reserve tightening next month, as well as geopolitical tension in the Middle East, weighed on sentiment.
Turnover was thin, however, as the Thanksgiving holiday in the United States dampened trade in global markets.
The Polish zloty and the Hungarian forint were 0.2 percent weaker against the euro by 1510 GMT, with the Polish currency trading at its lowest levels in more than two weeks.
Warsaw's blue-chip share index gained 1 percent, tracking gains in global equities as they continued to recover from recent falls.
However, sentiment is fragile as Poland's new government, sworn in last week, could unveil further measures that could hit listed companies including banks.
The new finance minister said a planned bank tax would raise up to 6.5 billion zlotys ($1.6 bln) a year, higher than expected.
Polish banks stocks still rose, recouping some of their recent steep losses. PKO BP bank shares touched a three-month low before reversing course to close up 0.2 percent.
In Hungary, central bank rate setter Gyula Pleschinger said risks were growing that the bank will have to cut its economic growth forecasts in its quarterly inflation report next month.
Any monetary expansion in response would affect the bank's existing non-conventional policy tools, he said.
Demand was robust at Hungary's bi-weekly government bond auctions where investors bought debt worth 84 billion forints ($286 million), well above the 47 billion forint original offer.
But yields changed little from secondary market levels.
"Probably local banks were behind the demand but they focus on the auction and are less active in the secondary market," one Budapest-based trader said.
Polish bonds have outperformed Hungarian peers this week, probably because supply in Warsaw will be weaker than in Hungary for the rest of the year, the trader said.
Poland bought back 730 million euros worth of bonds due in February at a tender.
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