BUDAPEST: The forint extended its losses, hitting a two-month low against the euro on Wednesday after the Hungarian central bank (NBH) dropped its guidance for gradual monetary tightening.

The NBH, which has been regarded as the most dovish central bank in the eastern wing of the European Union for most of this decade, halted a nearly seven-year run of monetary easing by raising its overnight deposit rate on Tuesday.

It increased the rate by 10 basis points to -0.05 percent, keeping its base rate on hold at a record-low 0.9 percent as expected.

But it surprised by saying that the hike was a one-off, rather than the beginning of a gradual increase, as surging wages had put upside pressure on inflation, while slowing growth in the world and Europe have the opposite impact.

There is no drastic inflation pressure in the economy, Prime Minister Viktor Orban's nominee for NBH deputy governor, Mihaly Patai, said on Wednesday, striking a similarly dovish tone.

The forint, after its biggest daily drop for years against the euro on Tuesday, pierced the 320 psychological line on Wednesday.

It traded at 320.23 at 1413 GMT, down half a percent on the day, though it was off a 2-month low of 320.75.

Other Central European currencies eased 0.1-0.2 percent after European Central Bank President Mario Draghi said the bank could further delay an interest rate hike as risk to growth were on the rise.

The comments pushed government debt yields further down in the euro zone and Central Europe after a rally in the past weeks.

Hungarian bonds, one of the biggest gainers in that rally, were on a roller-coaster as investors digested the NBH's shift away from further tightening.

The 10-year benchmark paper traded at a yield of 2.86 percent, up from a session-low of 2.83 percent, but down 7 basis points from Tuesday's fixing.

It almost closed the gap with the corresponding Polish yield which dropped 4 basis points to 2.81 percent.

Bucharest's blue-chip stock index rose 0.8 percent to 3-month highs after a much-awaited draft government decree showed that a widely criticised new Romanian bank tax would be lowered and de-linked from money market rates.

Warsaw's blue-chip index was pushed into the positive by an over 7-percent surge in the shares of video games developer CD Projekt.

It reported a fall in its 2018 net profit, but its stocks were boosted by hopes that it may launch its much-awaited "Cyberpunk 2077" game at the E3 fair in Los Angeles in June.