BUDAPEST: The zloty eased on Tuesday after data showed a smaller-than-expected rise in Polish inflation in July, underpinning the view that interest rates will not rise any time soon.
The Polish currency eased 0.14 percent against the euro to 4.277 by 0845 GMT, but was still near seven-week highs of 4.2676 touched in overnight trade.
Central Europe's main currencies were mixed as the closely watched dollar index failed to find clear direction, trading near the multi-week highs reached in recent sessions.
In Poland, a rise in fuel prices pushed up the annual inflation index to 2 percent in July from 1.9 percent in June, despite a drop in food prices.
The figure was below analysts' 2.1 percent forecast and well within the Polish central bank's 1.5-3.5 percent target range.
Poland's was the first July inflation figure published in the region. Slovenia said later that its annual inflation eased to 2.1 percent in July from 2.3 percent in June.
The new figures are unlikely to change the Polish central bank's loose monetary policy, despite roaring economic growth driven by rising real wages in Poland and the wider region, market participants said.
"Rate stability is the most likely scenario until the end of 2019," Erste analyst Katarzyna Rzentarzewska said.
Wages have risen strongly across Central Europe, driven by tight labour markets.
A recent pick-up in inflation has caused more concern in Hungary, which is also keeping monetary policy loose, than in Poland.
But the worries have eased as the US dollar stabilised in recent weeks, easing depreciation pressure on the forint and other Central European currencies.
The forint traded at 2-week highs on Tuesday, firming 0.1 percent to 321.35 against the euro, and shrugging off a jump in Hungary's annual producer price index to 7.5 percent in June from 5.3 percent in May.
Hungarian economic growth could get a further boost with BMW saying on Tuesday it would invest one billion euros in a new car factory in eastern Hungary, increasing the region's robust vehicle output
"The investment will be spread over years," one Budapest-based currency dealer said.
"The cause of the forint's firming is the general global good mood. Only the Turkish lira is falling in emerging markets," the dealer said.
A fixed income trader said Hungarian government bond auctions on Thursday could draw solid demand and yields could drop further.
The paper was steady on Tuesday, while Polish bond yields dropped by 1-2 basis points as the Bank of Japan's reassurance that it would keep its ultraloose monetary policy helped government debt yields drop across the world.
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