CEE MARKETS-Crown hangs around 24/euro while other FX ease back

By Jason Hovet

PRAGUE, Jan 6 (Reuters) - The Czech crown bucked weakening pressures in central Europe on Friday, gaining a touch to hang 12-year highs, while Hungary's forint pulled back from four-month highs.

The two currencies have led gains early in 2023 but markets were starting to cool somewhat, with stocks in Prague .PX and Budapest .BUX edging lower amid more subdued global sentiment as investors eyed the U.S. -farm payrolls report due later in the day.

U.S. job market data on Thursday highlighted chances of the Federal Reserve keeping its aggressive rate hike path, which boosted the dollar and hurt interest in riskier emerging markets like in central Europe.

The forint EURHUF= dropped 0.2% to 396.50 to the euro in mid-morning trade. Poland's zloty EURPLN= was down 0.2% at 4.698 per euro while local markets were closed for a holiday. The Romanian leu EURRON= was steady at 4.93.

Only the crown EURCZK= gained, rising 0.2% to 24.03 to the euro, coming after the release of better-than-expected industrial output data from November and the minutes from the Czech central bank's last policy meeting on Dec. 21.

Despite some "hawkish" tones in the minutes, markets generally see stable interest rates ahead for the Czech central bank and others in central Europe - where tightening started already in 2021, before hikes by global peers.

With global banks like the Fed or European Central Bank in tightening mode, analysts expect pressure on currencies in the region in the first half of 2023 as interest rate differentials shrink and economies flirt with recession.

This is despite an early bounce so far in January, helped largely by easing energy prices.

"The more positive global environment in combination with a clear (central bank pledge to prevent crown weakening) are the main reasons for surprising crown profits," CSOB said, adding that can change quickly.

A Reuters poll on Friday showed analysts forecast the crown to weaken back to 24.50 by the end of the year, despite trading below 24 for the first time since 2011 to begin the year.

ING said also in a it saw the recent rally in central Europe starting to fade.

"The lower EUR/USD and the outlook of strong U.S. labour market data thus indicate a correction of previous gains in the CEE region," it said. "We saw some losses yesterday and we expect a continuation today.

"In our view, the most vulnerable at the moment are the leaders of the previous rally: the Czech crown and the Hungarian forint," it added.

(Reporting by Jason Hovet in Prague, Editing by William Maclean)

((jason.hovet@thomsonreuters.com))

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