WARSAW, Nov 18 (Reuters) - Emerging Europe's

currencies slipped on Monday, led lower by the Polish zloty,

which gave back some gains from recent days as geopolitical

tensions and the power transition in the United States

weighed on Central-Eastern European assets.

On Sunday, three sources told Reuters that outgoing U.S.

president Joe Biden had allowed Ukraine to use U.S. arms to

strike deep inside Russia.

"The escalation of the war in Ukraine and the upcoming

transfer of power in the U.S. to D. Trump in January is a

source of uncertainty for investments in assets of Central

and Eastern European countries, including Poland," ING BSK

analysts wrote in a note.

The zloty shed 0.4% to the euro trading at

4.3355, giving up close to half of its gains since last

Tuesday.

A Warsaw-based trader said the optimistic view was that

the zloty had clearly gained against the euro in the previous

week and remained in the middle of its range in recent

months, but that Biden's decision had "opened everyone's

imagination", with analysts weighing the odds of escalation.

"If it were to inadvertently go towards escalation, which

for now is, of course, not a base scenario, we would see huge

volatility, and then, of course, such a play is worth a lot

of money," the trader said.

"For now this is not being played, these are some minor

movements, though there is clearly some beat on the market at

the start of the week, so for now I would suggest taking the

optimistic strategy."

In recent days Poland's ministry of finance had given

strong support to the zloty, exchanging euros from Brussels

on the market, and some investors positioning accordingly,

the trader said. The ministry in tended to be active in the

second half of the day, according to the trader.

In Hungary, the forint lost 0.3% against the

euro, trading at 409.15 ahead of an interest rate decision by

the Hungarian central bank on Tuesday. Market expectations

suggest that the bank will maintain its interest rate at

6.5%, which is currently the highest in the European Union,

tied with Romania.

"The NBH doesn't have many options at the moment despite

inflation and GDP surprising to the downside. Friday's move

up in EUR/HUF again shows that the risk-off mood here

persists," ING wrote in a note.

The forint has shed nearly 3% since the NBH's Sept. 24

rate cut and has hit a 22-month low after the re-election of

Donald Trump, whose trade tariff plans could strongly hit

central Europe. It is down around 6% against the euro this

year, making it the region's worst-performing currency.

Markets have already priced in that the NBH will keep

rates on hold and what could move the forint's rate is the

statement and commentary from the bank after the decision, an

FX trader in Budapest said.

A Budapest-based trader said today's downward move by the

forint corresponded with weakening regional peers likely

caused by uncertainty around U.S. policies ahead and the

stronger dollar, pressuring riskier assets.

Elsewhere, the Czech crown edged 0.2% lower,

trading at 25.30 per euro.

"The crown slightly appreciated (after) the hawkish

minutes from the CNB's (last) meeting as well stabilisation

of U.S. yields," bank CSOB said in a note.

"On the other hand, overall global conditions - a strong

dollar, high yields - will probably not give the crown a

longer breather, and we do not expected any significant

positive impulses that could reverse market scepticism."

CEE SNAPSHOT AT

MARKETS 1222 CET

CURRENCI

ES

Latest Previous Daily Change

trade close change in 2024

Czech 25.3000 25.2620 -0.15% -2.37%

crown

Hungary 409.1500 408.1400 -0.25% -6.35%

forint

Polish 4.3320 4.3177 -0.33% +0.29%

zloty

Romanian 4.9765 4.9769 +0.01% -0.04%

leu

Serbian 116.8800 116.9800 +0.09% +0.31%

dinar

Note: calculated from 1800 CET

daily

change

Latest Previous Daily Change

close change in 2024

Prague 1676.43 1676.200 +0.01% +18.56%

0

Budapest 78827.66 77771.12 +1.36% +30.04%

Warsaw 2178.06 2188.75 -0.49% -7.04%

Bucharest 17550.01 17638.19 -0.50% +14.18%

Spread Daily

vs Bund change

in

Czech spread

Republic

2-year 5-year 10-year Poland

2-year 5-year 10-year FORWARD

3x6 6x9 9x12 3M

interban

k

Czech Rep Hungary Poland Note: FRA are for ask prices

quotes

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