CEE MARKETS-Relief on US tariffs buoys central Europe's currencies

By Anna Wlodarczak-Semczuk

WARSAW, Jan 24 (Reuters) - The Polish zloty held its gains on Friday after hitting a seven-year high a day earlier, while other currencies were stronger as investors were relieved that U.S. President Donald Trump did not announce new tariffs right after taking office.

The zloty reached a 7-year high around 4.21 per euro on Thursday, supported by a hawkish central bank, the prospect of a further inflow of funds from the EU, and the best prospects for GDP growth in the region, ING analysts said in a note.

"However, the scale of the recent move was significant, which suggests that before the weekend some investors may decide to take profits," they added.

Bank Millennium economists believe the zloty still has some room for strengthening.

"In our opinion, the target is still a move towards 4.20 (with a temporary break thereof level). A deeper strengthening of the zloty will require new impulses supporting global sentiment, which depends primarily on geopolitical events," they said in a note.

The zloty was up 0.06% at 4.2105 EURPLN= at 0948 GMT.

It was the only central European currency to firm in 2024 as Poland's central bank held interest rates while others in the region eased policy.

However, rate-setter Ludwik Kotecki said in an interview for Reuters published on Friday that the bank could trim interest rates by 50-100 basis points in 2025 and next year and the cuts could be of a similar size.

The Hungarian forint EURHUF=, which was the region's laggard throughout 2024, was up 0.1% at 409.30 per euro, firming to a more than five-week high.

"Trump is moving markets, he has just said that he would not immediately introduce punitive tariffs against China, and now the risks around that are being priced out of the market, that is why the dollar is softening and emerging currencies are firming," an FX trader in Budapest said.

"Plus, on top of that, we have seen some good news. European PMI data were better than expected, which suggests that economies could start to do better, which is also helping the forint. But the Trump factor is the most important now."

The Czech crown EURCZK= was up 0.15% at 25.1020 to the euro, supported, like the other currencies, by "relief after the feared arrival of Donald Trump, or rather his restraint on imposing new or increasing existing trade tariffs", CSOB said.

Data on Friday showed Czech consumer confidence dropped by 3.4 points while industrial confidence rose by 4.3 points.

Moody's is expected to release a rating update on the Czech Republic in the evening.

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