BUDAPEST: Central European currencies eased before a meeting of the Hungarian central bank that's expected to keep its benchmark interest rate at a record-low 0.9 percent.
Many investors expect the Federal Reserve to signal an economic slowdown at its Dec. 18-19 meeting, but Tuesday's Polish data showed continued fast growth in wages were not expected to lead to a more hawkish monetary policy stance in Warsaw, either.
Central European currencies including the forint and the zloty slipped against the euro, falling less than 0.1 percent by 0948 GMT in slow trade.
Some analysts have said the Hungarian central bank may provide markets with some clues about a slow monetary tightening next year.
A bigger-than-expected retreat in annual headline inflation to 3.1 percent in December has reduced the likelihood of hawkish comments from the meeting, dealers said.
A fixed income trader said rate setters "can sit back" after a decline in crude prices in the fourth quarter.
"I do not think that they will issue any hawkish comment," the trader said.
Hungarian government bond yields as well as yields in interest rate swaps and forward rate agreements extended Monday's rebound after a sharp decline in recent months.
The yield of the 10-year government bond at 3.26 percent offered the highest spread over the corresponding Polish yield for over a month.
The Polish 10-year yield, which had fallen less in the past months, tracked a fall in Bunds and US Treasuries, and at 2.888 percent it set a new two-year low.
The Czech 10-year yield, bid at 1.948 percent, was flat.
A recent decline in Czech market yields has mis-priced the magnitude of likely further central bank rate increases, Societe Generale analysts said in a note.
The bank could keep rates on hold at its meeting on Thursday, but its "statement might be more hawkish than the market currently expects given the relatively weak CZK (crown) and ever strengthening demand pressures to inflation," they said.
The kuna traded at its weakest levels this month, at 7.405 versus the euro, off last week's five-month highs. Croatia's central bank bought 458 million euros on Monday in its second big market intervention in December.
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