BUDAPEST: The forint and the Czech crown firmed slightly on Thursday amid some expectations for monetary policy tightening while a pick-up in Hungary's economic growth bucked Central Europe's slowdown.
Czech and Hungarian inflation figures released earlier surprised on the upside, adding arguments to expectations that the Hungarian central bank will start monetary tightening soon and its Czech counterpart will continue its own tightening.
The crown and forint firmed a touch against the euro by 0940 GMT, while the Romanian leu and Polish zloty eased slightly.
The dollar's firming to a three-month high against the euro kept a lid on Central European asset prices, which are vulnerable to a decline in risk appetite often reflected in dollar buying.
Fourth-quarter economic output data from Poland, Romania and Slovakia showed slower but still robust annual growth that is outpacing euro zone economies. Poland led the trio with a 4.9 percent expansion.
Hungary's growth is even faster, picking up to 5 percent, its strongest since 2004, when the region's states joined the European Union.
The economy has become much more balanced since then, with the budget deficit and state debt declining and the country posting current account surpluses.
RATINGS EXPECTATIONS
Finance minister Gabor Gion cooled expectations for a rating upgrade from Standard & Poor's late on Wednesday, saying after meeting representatives of ratings agencies that Hungary would cut its debt slower than agencies have called for.
The forint firmed moderately after the GDP figures but, peaking at 318.52 against the euro, stayed closer to the weak end of the past four weeks' 315-320 range.
"The market is beginning to understand that the central bank will not rush into tightening. It is a slow process," one Budapest currency dealer said.
The bank will need to balance its policy between growing domestic inflation worries and a less hawkish stance from the US Federal Reserve and European Central Bank, one fixed-income trader said.
Regional equities moved little as investors kept an eye on US-China trade talks.
Bucharest stocks gave up most of the ground gained early in the session after senate speaker Calin Tariceanu said on Wednesday that the government could scrap a 2 percent tax on energy companies' turnover.
This year's tax increases, including a tax on bank assets to finance wage rises and other spending, have been widely criticised by industry and the central bank.
Romania's economic output data showed a slowdown in annual growth to 4.1 percent in the fourth quarter from 4.4 in the third quarter, underpinning worries that the draft 2019 budget was based on overly optimistic revenue assumptions.
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