BUDAPEST: Central Europe's most liquid currency, the zloty, eased on Thursday due to concerns over controversial government policies in Poland and fears that Britain will vote to quit the European Union in a referendum on June 23.
Other currencies were steady or just a shade weaker as investors expected the European Central Bank to keep monetary screws loose at its meeting, providing support to assets across Europe.
Monetary stimulus in the euro zone also supports asset prices in the European Union's emerging markets, counterbalancing the negative impact of expectations for a rise in Federal Reserve interest rates.
The zloty eased by 0.2 percent to 4.398 against the euro by 0838 GMT. The forint which is also often used as a regional proxy, also eased a shade to 313.75.
The region's currencies remain rangebound this week, buoyed by economic growth and stability even though risk aversion and worries over the world economy rose in global markets this week.
In Warsaw, investors awaited details of a government-backed plan to convert Swiss franc mortgages at the cost of banks, and developments in a row with Brussels over the rule of law in Poland.
A key risk which is observed across the entire region is the British vote, traders said.
A British decision to quit would mean that a generous flow of EU funds into less developed eastern members could get thinner, and would also cast doubts over the longer-term future of the EU project.
"Huge positions have been built already in markets, betting on 'Yes' or 'No' in the vote," one Budapest-based fixed income trader said.
"This is an event that you cannot ignore, you have to take a bet because the outcome will certainly cause big movement in markets, up or down," the trader added.
Government bond yields rose by 1-2 basis points in high-yielding Hungary, Poland and Romania, and dropped slightly in safe-haven Czech markets.
Equities were mixed. Warsaw's bluechip index dropped a quarter of a percent to a new 3-and-1/2-month low.
A Reuters poll of analysts showed that the zloty, the region's worst-performing unit this year, could shake off risks from domestic politics and the British vote by the autumn.
It is expected to firm about 3 percent against the euro by June next year, regaining all the ground that it has lost since 2015.
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