BUDAPEST/PRAGUE: The Czech crown retreated from multi-year highs on Wednesday after Czech central bank Vice-Governor Vladimir Tomsik said its strength allows the CNB not to rush into rate hikes.
Central European assets were mostly rangebound as investors
awaited a meeting of the Federal Reserve.
The crown shed less than 0.1 percent against the euro by 1307 GMT. But trading at 26.149, it was drifting away from overnight highs at 26.13, its strongest level since the CNB in April removed a cap of 27 on the currency, and also since late 2013 when the cap was introduced.
The crown's strengthening, partly fuelled by expectations of a rebound in inflation and CNB rate hikes, received fresh impetus on Tuesday through "buy" recommendations from banks including Citigroup.
But Tomsik, regarded as a dovish rate setter, was quoted by the newspaper Hospodarske Noviny as saying the crown had got stronger since the bank's latest outlook, which indicated rates rising in the second half of 2017.
"(This) means that we do not need to hurry quickly with raising rates," he said.
Even a delay to the fourth quarter from the third would retain a gap with markets, which have priced in a hike only for the second quarter of 2018, Komercni Banka trader Dalimil Vyskovski said.
He added that Tomsik's comments were "somewhat surprising.
"Market rates now (are) increasingly in a 'conundrum' mode."
An auction of Czech government bonds drew decent demand for long-dated papers, but little appetite for the zero-coupon 2022-expiry bond.
Investors in the region seek cues from the US Federal Reserve's guidance over its rate hike cycle.
The Fed is likely to go ahead with another 25-basis-point rate increase on Wednesday, the fourth hike of a rate increase cycle that started in December 2015.
The zloty eased to 4.1945 against the euro.
"The tone of the Fed... may create pressure for Polish IRS rates and bond yields to rise, and the holiday in Poland tomorrow may strengthen this reaction," BZ BWK analysts said in a note.
Warsaw's main equities index dropped slightly, driven by a fall of the shares of Pekao bank and state-run insurer PZU, after PKO's supervisory board dismissed its long-serving, respected Chief Executive Officer Luigi Lovaglio.
PZU and state-controlled fund PFR completed Pekao's takeover from Italian UniCredit last month.
Elsewhere, Budapest's main index hit another record high, briefly piercing the 36,000-point psychological level.
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