BUDAPEST: The crown and dinar bucked a fall in Central European currencies on Thursday as Czech inflation data kept alive expectations for higher interest rates and the Serbian central bank left its benchmark rate unchanged.
Investors mostly shunned currencies in emerging markets, with fresh US sanctions knocking down the rouble and Turkey's lira also falling further.
The forint and the zloty eased 0.3 percent against the euro by 1303 GMT, even though they did not drift far from multi-month highs on the firm side of the 320, and 4.27 lines, respectively.
The leu, after setting a new two-week low, traded at 4.651, down 0.2 percent.
It fell from Friday's seven-month highs after the Romanian central bank earlier this week disappointed some investors by not increasing its interest rates further, and said annual inflation could fall by the end of 2018 to 3.5, the top of its target rage, from 5.4 percent in June.
Hungary's and Poland's central banks have retained their loose monetary policy despite pressure on their currencies between April and July due to flows into the rallying dollar.
The dinar, on the contrary, was strengthened in the past months by investments and remittances from Serbians working abroad.
The Serbian central bank, meeting on Thursday, did not react to the past few months dinar selling with a cut in its 3 percent benchmark rate, the highest in the region, citing a rise in inflation and in the interest rates of leading central banks.
The dinar firmed 0.1 percent to 117.9 against the euro.
"We expect that the NBS will keep the key rate at the current level throughout the year, as we also expect a pickup in inflation and continuation of solid economic trends," Erste analyst Milan Deskar-Skrbic said in a note.
The Czech crown also bucked the regional trend, gaining 0.1 percent, to trade at 25.563.
Czech annual inflation retreated to 2.3 percent in July from 2.6 percent in June according to data published on Thursday.
The figure is still above the Czech central bank's (CNB) two percent target and in line with expectations, therefore it does not change expectations that the bank will continue to increase interest rates to fight inflation, analysts said.
"Although the July result was (by 0.3 percentage point) below the central bank's expectation, we don't assume that the bank would change its rhetoric on monetary policy," said Pavel Sobisek, UniCredit UniCredit's Czech unit.
Likely strong core inflation could even bring forward the next CNB rate hike, Citigroup said in a note, adding that the hike could come earlier than the fourth quarter.
According to an Aug. 6-8 Reuters poll of analysts, expected CNB rate increases could strengthen the crown by 2.4 percent relative to Wednesday's close to 25 versus the euro in the coming year, while the leu is seen easing 1.5 percent to 4.71.
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