Hungary's forint retreated to a key level against the euro on Monday as central Europe's currencies gave up some recent gains amid growing US-Iranian tensions that hit sentiment in the region.

The Czech crown also fell and backed off 20-month peaks hit last week, bidding at 25.386 to the euro, down 0.2%.

The forint, after touching a nearly two-week high in new year trade, fluctuated around 330 per euro as traders expected a test of the resistance level. It was off 0.2% at 330.05 at 0923 GMT. "Investors are nervous, and the positive story is less visible for the forint right now," a Budapest-based dealer said.

Investors grew cautious about riskier assets, worried that the killing of Iran's most prominent military commander by the United States could trigger a broader Middle East conflict.

The new worries - after the region's currencies were hit for much of 2019 by global trade concerns and uncertainty over Britain's European Union divorce - were hitting sentiment in the region following a rise in assets in recent months.

Stock markets dropped, with Budapest falling 1.7% and Prague down 0.8% Poland's zloty was flat while local markets were closed for a holiday. Romania's leu was also steady.

Romanian investors were geared up for the country's first bond auction of 2020, with the finance ministry offering debt due in 2023.