CEE MARKETS-Zloty touches 10-year high as markets eye Ukraine, interest rates

Releads with zloty 10-year high

PRAGUE, Feb 27 (Reuters) - The Polish zloty hit a 10-year high against the euro on Thursday on expectations that an end to the war in Ukraine could be approaching and that interest rates in central Europe's largest economy will remain high.

The zloty, Hungarian forint and Czech crown have all firmed past key levels this week amid talks on a ceasefire in the Ukraine-Russia conflict and after a German election result that boosted hopes of an economic recovery to help the region's export-reliant manufacturing.

Meanwhile, hawkish signals from the region's central bankers have buoyed currencies at a time when policymakers elsewhere are cutting the cost of credit.

"There are significant capital inflows into the PLN, in part related to the expectations that the war in Ukraine will end soon," said Piotr Bartkiewicz, an economist at Pekao in Warsaw.

"In addition, there are multiple arguments in favour of the PLN that are still playing out, such as high nominal and real interest rates and very good sentiment towards the Polish economy."

The zloty EURPLN= was 0.1% weaker on the day at 4.1385 to the euro by 1355 GMT, after having firmed as far as 4.127 earlier in the session.

Markets have shifted partly into a wait-and-see mood after Trump floated the idea on Wednesday of a 25% "reciprocal" tariff on European cars and other goods.

Hungary's forint EURHUF= weakened 0.2% to 399.90 to the euro on Thursday, holding on the strong side of the 400 level and near four-month highs.

The Hungarian central bank on Tuesday held its base rate for a fifth straight month at the European Union's joint-highest level of 6.5% and signalled its inflation outlook this year was shifting higher.

Commerzbank said in the longer term, factors like re-accelerating inflation, a new central bank governor whom markets perceive as potentially dovish and the continued blocking of European Union funds could hinder the forint.

"While we find the current rally in HUF consistent with broader market developments, for all the above reasons, we see EUR-HUF trading higher near the 417.0 level by the end of 2025," Commerzbank wrote in a note.

The Czech crown EURCZK= retreated from an eight-month high hit this week but hovered below the psychological 25 per euro level at 24.962. The Romanian leu EURRON= was steady at 4.9755 per euro, and stock markets in the region extended gains.