CEE MARKETS-Zloty skirts fresh seven-year-highs, leading FX gains

By Anna Koper and Gergely Szakacs

WARSAW/BUDAPEST, Feb 10 (Reuters) - Poland's zloty EURPLN= climbed to approach fresh seven-year-highs on Monday, buoyed by the central bank's hawkish stance and the prospect of a potential peace plan for Ukraine, leading currency gains in central Europe.

At 0950 GMT, the zloty traded at 4.1870 to the euro, up 0.26% on the day, extending its gains for the year to 2.1% and defying market expectations of a pullback after a recent rally.

PKO BP analysts said the zloty would be driven by any new announcements on U.S. tariffs and "the ongoing behind-the-scenes talks between politicians on a potential peace plan for Ukraine."

U.S. President Donald Trump on Friday said he would probably meet Ukrainian President Volodymyr Zelenskiy this week to discuss Ukraine's war to repel Russian invaders.

"In the flood of incoming information and data, the zloty will remain highly volatile, although there is an asymmetric risk of an upward correction developing on the already heavily oversold EUR/PLN pair," PKO BP said.

Other central European currencies were also mildly stronger in morning trade, with economists polled by Reuters projecting a retreat by the region's currencies over the next six months.

The zloty has also received support from the hawkish stance of the National Bank of Poland, which ruled out rate cuts for the near future amid a rebound in inflation, loose fiscal policy and Poland's expected strong economic growth.

Hungary's central bank, which was forced to abandon rate cuts at the European Union's joint-highest level last year amid falls in the forint, has also said tight monetary policy was needed amid increased inflation risks.

"Tight monetary policy is helping supporting the currency, which is trading stronger than its fair value, in our view," economists at Wood & Company said.

"We expect this strength to continue in the coming months: monetary policy will likely remain on hold, while high local interest rates are attracting rising portfolio inflows."

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