BUDAPEST/ZAGREB: Central European assets rebounded on Friday after campaigning was suspended ahead of Britain's June 23 EU membership referendum after a member of parliament was killed.
Investors fear a British exit from the European Union could curb funding to the region and slow economic growth.
Britain was shocked by the death of Jo Cox, a pro-EU lawmaker who was shot and stabbed in the street on Thursday.
Campaigning was halted and one opinion poll set for publication on Friday was delayed. The probability that Britain votes to remain in the EU increased, bookmaker odds showed.
Central European assets rose after campaigning was suspended, mBank analysts said in a note.
The forint firmed 0.1 percent against the euro to 314.50 by 0909 GMT, still near 3-week lows. The leu also gained 0.1 percent.
The zloty eased 0.1 percent to 4.4355, but was off Thursday's 3-week low of 4.457, also getting some help from comments from central bank rate setters reaffirming that new rate cuts are unlikely.
Prague led a rise of stock indices. It gained 1.8 percent, drifting off Tuesday's 7-year lows.
Polish and Hungarian government bond yields, which flirted with multi-month highs earlier this week, dropped. Polish 10-year bonds traded at 3.20 percent, down 8 basis points.
But implied zloty volatilities for one month approached Tuesday's 4-year highs, indicating expectations for further swings in the run-up to the British vote.
"Even more volatility in the CEE exchange rates, especially for HUF and PLN, should be expected," said Martin Stelzeneder, analyst of Raiffeisen, in a note, adding the zloty could weaken past 4.475 versus the euro, to 4-month lows.
Analysts said Poland's trade links and concerns over government policies made its markets the most vulnerable in the region to a possible British EU exit.
Polish central bankers have said it would not make sense to spend from reserves to fight a zloty weakening.
Jerzy Kropiwnicki said the bank should not consider market intervention before the zloty eases near 5 against the euro.
Other central banks in the region have not signalled any measures to fight possible market turmoil.
Hungary's central bank, meeting two days before the British vote, is expected to keep interest rates on hold, after pledging last month that it had finished cutting.
Croatia's central bank could be forced to buy the kuna to keep domestic markets stable, after parliament ousted Prime Minister Tihomir Oreskovic, analyst Stephan Imre said in the Raiffeisen note.
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