BUCHAREST: Polish zloty hit one-month highs as central European currencies tracked solid gains in the euro after the US Federal Reserve announced a fresh round of monetary stimulus.
Bonds were mixed across the region, with yields on Hungarian paper down some 8-13 basis points across the curve and Polish bonds a touch weaker.
Traders attributed the fall in Poland's debt to a strong correlation with German bunds.
Market watchers say that Polish bonds have attained regional safe heaven status in recent months and any boost of risk appetite prompts investors to pull back.
"The correlation is simple when German bunds rise, ours rise as well (and vice versa)," said a fixed income dealer at PKO BP, Maciej Popiel.
Regional stocks rose by 1.0 to 3.0 percent with Budapest's BUX posting the biggest gain.
Assets have been boosted in the past few weeks by expectations the US and euro zone central banks would pump more money into markets.
By 1347 GMT, the zloty was up 0.6 percent at 4.06 per euro and the Hungarian forint 0.4 percent higher at 281.73. The Romanian leu and Czech crown firmed by 0.2 percent, to 4.5 and 24.398 respectively.
"I think risk is going to perform well for a while and I expect the zloty is going to test the level of 4.00 soon," said one London-based trader.
"The Fed move last night coupled with the ECB moves recently have stabilised the situation. There are still problems in the euro zone but they may have been taken out of the picture for the next few months."
Hungarian yields fell by up to 13 basis points, with three- and five-year bond yields hitting one-year lows in an illiquid market.
Analysts have been glum on the outlook for emerging Europe's currencies as the region's economies battle recession or a sharp slowdown, and central banks look to loosen policy.
Data showed Hungary's industrial output stagnated in July year on year, in line with a preliminary estimate.
Traders said the Czech crown was likely to move around the 24.40 per euro level.
"The positive sentiment on global markets is so significant that even the fundamentally overvalued Czech currency will have an opportunity for more gains," bank CSOB said in a note.
"We see the final point at which the central bank could intervene against the crown, at least verbally, at close to the 24.00/euro level."
The Czech central bank is due to hold a policy meeting on Sept. 27 and markets are pricing in a 25 basis point cut in the two-week repo rate to a record low 0.25 percent.
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