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CEE MARKETS-Currencies gain, but leu bucks trend as central bank turns dovish
* Leu eases to two-week low* Retreating dollar lifts other CEE units* Leu underperforms as Romanian central bank turns lesshawkishBy Sandor PetoBUDAPEST, Aug 7 (Reuters) - The leu dropped to atwo-week low against the euro on Tuesday, bucking a rise byother Central European currencies, after the Romanian centralbank downplayed chances of another rate increase.Before Monday's meeting, the majority of analysts hadexpected the central bank to raise its 2.5 percent benchmarkrate, after three increases since January.But the bank kept the rate on hold and Governor MugurIsarescu said it may not rise much further as inflation, thehighest in the region at 5.4 percent in June, will begin to fall.The leu, retreating from Friday's seven-month highs at 4.612versus the euro, fell after the decision and the comments, andextended its loss on Tuesday.It traded at 4.6465 at 0831 GMT, a two-week low.ING analysts said in a note that even before the centralbank's meeting they had expected a gradual retreat into the4.65-4.67 range by the second half of August. The bank's "dovishtwist could help this happen sooner" Monetary Unit Of Hungary , aftertouching 4.652, a two-week low.ING analysts said in a note that even before the centralbank's meeting they had expected a gradual retreat into the4.65-4.67 range by the second half of August. The bank's "dovishtwist could help this happen sooner", they said.In the past few months, a rally by the dollar was thedriving force in the region's currency markets, causing CentralEurope's main currencies to sell off. But from time to timeinvestors also looked at a divergence of monetary policies inthe region.The leu is still stronger than it was at the endof 2017 levels against the euro and the Czech crown has slippedonly 0.4 percent as the central bank has also increased itsrates.Hungary and Poland's monetary policies remained loose, andthe forint has shed 2.7 percent so far this year andthe zloty 1.9 percent.The forint rose above the 320 line on Tuesday for the firsttime since the middle of June.With the dollar's index against six major currenciesretreating, appetite for the region's currencies was good, whileTurkey's lira also rebounded after a plunge on Monday."But investors in our region do not really care about thelira, which is a local, political story," one Budapest-basedfixed income dealer said.The dealer added that some investors may be positioningahead of Wednesday's Hungarian inflation figures for July.Analysts expect the annual figure to tick up to 3.2 percent.June's 3.1 percent rate was already a five-and-a-half-year high,but inflation is expected to retreat around the end of thisyear."If the July figure is high, and the international mood issour, expectations for continuing loose monetary policy can leadto a weakening of the forint," the dealer said.The zloty also gained, to 4.2579 versus the euro,off a three-month high reached in early trade at 4.2465."We think that in the short term, it could be difficult forthe zloty to continue its appreciation impulse as the dollarcould remain strong and investors could take profit from therecent EURPLN drop," BZ WBK analysts said in a note. CEE SNAPSHOT AT MARKETS 1031 CETCURRENCIESLatestPreviousDaily Changebid close changein 2018 Czech
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