BUDAPEST: Central European currencies eased slightly on Monday on expectations that the US Federal Reserve will increase interest rates again this week.
A US hike on Wednesday is mostly priced in but may still move regional currency and bonds markets which are also vulnerable to shocks from regional and European inflation figures, due out from Friday, analysts and dealers said.
The zloty led currencies lower, dropping 0.15 percent against the euro by 0850 GMT, to trade at 4.3085.
The crown was also a shade weaker at 25.618, even though the Czech central bank is expected to increase interest rates at its meeting on Wednesday, delivering its third monthly hike in a row.
Government bond yields were steady or firmer and investors will closely watch the Federal Reserve's comments, traders said.
Poland's 10-year yield bid up 4 basis points (bps) at 3.274 percent, only 1 bps from 3-and-1/2-month highs.
Czech and Hungarian 10-year yields traded at multi-year highs, while Poland may be next economy in the region where inflation concerns increase and lead to a rise in long-term bond yields, some analysts said.
"As reflation trades are well entrenched in the rates markets in Czechia and Hungary, investors may turn to Poland as the next candidate," Bank of America Merrill Lynch analysts wrote.
"We see some positive underlying movements, but still far from triggering a hawkish turn by the National Bank of Poland," they wrote.
Polish shares outperformed most Asian and European markets which eased due to fears of a long US-China trade war after China decided to cancel talks.
Warsaw's blue-chip index rose 0.8 percent, helped by news that eight Polish stocks, including oil group PKN Orlen were added to the STOXX Europe 600 index, Budapest-based Equilor brokerage analyst Zsolt Bosnyak said.
PKN shares rose 1.6 percent.
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