BUDAPEST/PRAGUE: The Czech crown, boosted by expectations of hawkish central bank comments, led a rebound in Central European currencies on Wednesday after the previous session's plunge on the back of a dollar rally.
The crown rose 0.3 percent against the euro to 25.598 by 0844 GMT, well off a 4-month low set at 25.847 on Tuesday, but far lower than the levels around 25 crowns projected for this quarter by the Czech central bank (CNB).
The CNB holds a monetary policy meeting on Thursday.
The bank, which began raising interest rates in August to fight rising inflation, will discuss new economic forecasts and may take a more hawkish view on rates, with the crown also depressed by yearly corporate dividend payments.
"In light of the central bank depending on the exchange rate to tighten monetary conditions, which is not happening, it will be interesting the position on the crown the bank will take now," Czech bank CSOB analysts said in a note.
The region's markets were closed for May Day on Tuesday, and that illiquidity exposed them to global sentiment, dealers said.
Central Europe's main currencies sank to multi-month lows against the euro as the dollar's strength pushed them through stop-loss levels.
The view that the Federal Reserve will raise expectations on Wednesday for an interest hike in June is supporting the dollar.
A flow of money into the dollar often hurts assets in emerging markets including the European Union's eastern economies even though integration with the euro zone and fast growth provides them with some protection.
April Purchasing Managers' Indexes (PMIs) released in the region showed continuing economic growth, even though Hungary's figures indicated a slowdown from March.
Polish inflation figures which often predict trends in the rest of the region, showed a pick-up in the annual rate to 1.6 percent in April from 1.3 percent a month earlier, largely in line with expectations.
Poland's 10-year government bond yield rose 7 basis points to 3.14 percent, its highest level in four weeks, rising more than US and German yields which it often tracks.
The corresponding Hungarian, Czech and Romanian yields were steady.
The zloty and the leu firmed 0.1 percent against the euro, rebounding from 6- and 3-month lows, respectively.
The forint eased a shade from late Tuesday levels, but trading at 313.90 was well off Tuesday's 9-1/2 month low of 315.58.
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