BUDAPEST: The dinar firmed on Tuesday, outpacing other Central European currencies as Serbia's central bank kept rates steady at its latest meeting, eyeing anticipated Federal Reserve rate hikes.
The bank said inflation pressures remained low but a rise in US interest rates had reduced investors' interest in assets in emerging markets including Serbia.
The dinar gained 0.1 percent to 122.53 against the euro by 1314 GMT.
Some dealers and analysts in a Reuters poll had projected that the Serbian central bank could lower its 4.25 percent benchmark rate by 25 basis points.
Serbia's annual inflation, at 0.4 percent in April, is well below a target of 2.5-5.5 percent.
Tuesday's meeting was the central bank's first since the Serbian Progressive Party of Prime Minister Aleksandar Vucic won re-election on April 24.
Poland's zloty marked time following a surge after Moody's on Friday dampened the outlook for the country's credit rating, although this was a better outcome than the outright downgrade some market participants had anticipated.
The zloty retreated to 4.3625 against the euro, after touching a 4-week high at 4.355. Polish government bond yields rose 1-2 basis points after a decline in recent weeks.
Hungary's forint also gave up early gains, retreating to 315.32 versus the euro from 314.25, while yields on Hungarian government bonds edged sideways.
Market participants said Hungarian assets derived some support from hopes that Fitch would lift its credit rating back into investment grade in a review on May 20.
Hungary's debt and dependence on foreign financing has declined in recent years, but the draft budget for 2017 showed some fiscal loosening and first-quarter economic output figures released last week were disappointing.
"A few months ago 80 percent of people expected an upgrade and 20 percent did not," a Budapest-based fixed income trader said. "Now 80 percent do not expect an upgrade."
In Prague, the crown was flat at 27.023, at the central bank's cap at levels near 27, after better than expected first quarter GDP data.
Czech President Milos Zeman appointed economist Vojtech Benda and financial sector veteran Tomas Nidetzky to the board of Prague's central bank on Tuesday, providing allies for the next likely governor, Jiri Rusnok.
Rusnok said earlier this week that the likelihood of the bank exiting its weak crown policy next year was very high.
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