BUDAPEST/WARSAW: Central European currencies strengthened on Friday after first-quarter Czech and Polish economic output figures confirmed that growth in the region outpaced the euro zone.
Regional currencies and government bonds also benefited from a continuing rebound in bonds in developed markets after weeks of price falls which also spilled over into EU emerging markets.
A renewed sell-off could prompt another fall in regional assets although the output data is buoying sentiment for now, traders said.
The Czech crown firmed 0.3 percent against the euro by 1307 GMT, after Prague said output surged 3.9 percent in annual terms in the first quarter, almost twice the pace forecast by analysts.
Poland's growth at 3.5 percent was also above analysts forecasts. Output statistics from other states in the region also showed much faster growth than the euro zone's 1 percent average.
The zloty gained half a percent and the leu 0.4 percent against the euro.
Hungary's 10-year bond yield fell 12 basis points from Thursday to 3.61 percent.
But Poland's 10-year yield rose by 6 basis points from a session low to 2.84 percent.
"The strong Polish economic figures boosted expectations among some investors that Poland will raise rates earlier than the market had expected," Raiffeisen Polbank analyst, Michal Burke, said.
Most analysts polled by Reuters at the end of April expected the Polish central bank to start lifting interest rates in the third quarter of next year.
Equities mostly firmed in the region, led by a 0.9 percent rise in Budapest's main index . Shares in Hungary's biggest commercial bank OTP rose half a percent as it posted better-than-expected first-quarter results.
Earnings reports for major listed banks in the region have generally been strong but in Poland they have been mixed.
Shares in PKO BP eased 1.2 percent, extending losses after Poland's biggest bank reported lower-than-expected earnings two days ago.
Other Polish banks like Pekao, BZ WBK or mBank beat expectations, but Pekao was helped by good bond trading results and BZW and Mbank by other one-off factors.
Low interest rates and a surge in the repayments of Swiss franc loan holders this year are weighing on Polish bank earnings, capping equities' gains despite robust economic growth in the region.
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