Central European currencies and stocks were a touch lower on Friday as US lawmakers sought to avoid an end of year fiscal crunch, while Romania's leu and stocks remained close to seven-month highs due to increased political stability. Stock markets in central Europe fell up to 0.5 percent - though the Warsaw bourse was close to its highest since mid-2011.
Bonds were flat, with Polish yields close to record lows after Warsaw said it planned to have more than half its 2013 financing needs covered after the first quarter.
Investors were eyeing last-minute efforts by US officials to reach a deal that would avoid some $600 billion in tax hikes and spending cuts due to kick in at the end of the year.
Few analysts predict a deal that will deal with all the issues dividing Republicans and Democrats at once but many have tempered concern by speculating the government will muddle through and find deals that can ease some of the worst of the impact on the economy.
"In general, the market seems to be positive and expectant with regards to the US solution, though (market) volatility is likely to prevail until the very last moment," a dealer in Budapest said.
The Romanian leu is the region's worst-performing currency in a year which has seen it flick between four governments, preventing the central bank from following its peers and cutting rates to support growth.
The leu slipped 0.2 percent to 4.435 per euro, but remained close to a seven-month high hit after a new government took office following a convincing election win. The Bucharest bourse hit its highest since May.
"We see the RON caught in the 4.42-4.44 per euro range for this year's last couple of sessions," said ING analyst Mihai Tantaru.
The forint and zloty have led gains in emerging Europe this year with rises of 8.1 percent and 9.5 percent respectively, as their higher yields attracted investors in a rally fuelled by major global central banks' liquidity-boosting measures.
Easing monetary policy in the region has cooled the market in the last half of 2012, though, causing currencies to mostly flatten out going into 2013.
The Hungarian forint dropped to its lowest level versus the euro since June this week while the local market was closed for a holiday, but it has regained about half those losses. The forint inched up 0. 2 percent to 29 0.8 to the euro, after reaching a low of 295.5 on Wednesday. Poland's zloty was down 0.3 percent a t 4.079.
In the Czech Republic, the central bank has said currency interventions to weaken the crown could be the next monetary easing tool now that rates are near zero. Dealers have said the level of 25 to the euro could be decisive for the bank.
The currency, which has gained nearly 2 percent this year, w as 0 .3 percent lower at 25.119 t o the euro. "There is not much power to push the crown below 25," a Prague currency dealer said.