CEE MARKETS-Currencies hold on to gains as markets eye talks on Ukraine

By Anita Komuves

BUDAPEST, Feb 18 (Reuters) - Central European currencies were a touch weaker on Tuesday but held on to their gains from last week as they were supported by the possible start of talks on resolving the Ukraine-Russia war.

U.S. and Russian officials met on Tuesday in Riyadh for the highest-level talks to date between the two former Cold War foes on ending the war in Ukraine. Ukraine, which is not attending, says no peace deal can be made on its behalf.

Currencies and stocks in the region were boosted by a risk-on market mood after U.S. President Donald Trump announced last week that he had held a call with Russian President Vladimir Putin on possible talks on the war in Ukraine.

The Polish zloty EURPLN= edged down 0.05% to trade at 4.1585 versus the euro, hovering near a seven-year high.

"Tuesday's morning trading on the zloty market brings a moderate weakening of the domestic currency, which is related with global capital flows towards the US dollar," BOS Bank wrote in a note.

"From a technical point of view, the Polish zloty remains in narrow consolidation against the EUR in the 4.1671 – 4.1493 range," they said.

The Hungarian forint EURHUF= was 0.07% lower, trading at 401.6 per euro, near its strongest levels in more than three months.

"The continuous flow of good news has a positive effect on currencies in CEE and I feel that the attitude of investors towards the forint has changed," an FX trader in Budapest said.

"The chance of peace talks in Ukraine is important, and with such high inflation the comments by a Hungarian central banker about no rate cuts this year also helped," the trader said.

Hungarian inflation surged to an annual rate of 5.5% in January, above analysts' forecasts. Earlier this month, outgoing rate-setter Gyula Pleschinger told Reuters that he saw no opportunity for interest rate cuts this year.

Central European currencies have been supported by signals from central bankers that they will be cautious about cutting the cost of credit amid persistently high inflation.

The Czech crown EURCZK= slid 0.14% to 25.09 per euro.

"The crown is still trading close to the 25.00 EUR/CZK level at the beginning of the week. However, it still lacks a significant impulse to break this level," CSOB Bank wrote.

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