CEE MARKETS-FX slips slightly as firming dollar signals risk-off

WARSAW, March 21 (Reuters) - Central European currencies traded slightly, as the dollar continued to rebound against the euro, signalling a risk-off mode among investors ahead of next week's central bank meetings in Hungary and the Czech Republic.

Most emerging market currencies were subdued on Friday as the dollar held onto its gains, ending a week marked by a plethora of global interest rate decisions.

Fed Chair Jerome Powell said following a 'hold' decision, that U.S. President Donald Trump administration's initial policies, including extensive import tariffs, appear to have tilted the U.S. economy toward slower growth and at least temporarily higher inflation.

"The market narrative is focused on April 2, when the U.S. is to introduce so-called reciprocal tariffs against its trading partners, which is generating increasing uncertainty regarding forecasts for global economic growth," DM BOS brokerage wrote in a note.

"Next week will be basically the last before the introduction of Trump's tariffs, which may increase nervousness and so-called risk-off."

By 0942 GMT, the Hungarian forint EURHUF= traded 0.1% lower against the euro at 399.30, remaining in tight ranges a shade firmer than the key 400. The forint is the region's top performer this year, gaining 3%.

Next week, the National Bank of Hungary (NBH) is scheduled to decide on interest rates in the first meeting chaired by new central bank governor Mihaly Varga.

"With higher inflation and GDP growth data, we expect the NBH to keep its base rate unchanged at 6.50% at its upcoming core meeting on March 25," Morgan Stanley analysts wrote, adding they expected further caution in the bank's forward guidance, given elevated global economic and geopolitical uncertainty.

Equilor brokerage said in a note that 398 was a strong and important support level for the euro-forint.

The Czech crown EURCZK= traded flat at 25.01 per euro, just a hair on the weaker side of the key 25 level.

The Czech National Bank (CNB) is also set to hold a policy meeting next week and, according to ING analysts, everything was pointing towards keeping borrowing costs on pause at 3.75%, with focus more on the conditions needed for easing in May.

"The CNB's cautious approach alongside global events should be supportive for FX, and we believe that next week EUR/CZK may retest levels below 25.00 and potentially go below this year's lows of 24.90," ING wrote in a note.

Data on Friday showed Czech business confidence at its strongest since mid-2022, with consumer sentiment rising.

Elsewhere, the Polish zloty EURPLN= shed 0.2% to the euro, trading at 4.1990, on the firmer side of the psychological 4.20 level.

"Along with the flow of capital to the dollar on the base FX, we observed a moderate weakening of the domestic currency," Poland's development bank BGK analysts wrote in a note.

On Thursday, data showed wages in Poland rising less than expected in February, a reading that is likely to strengthen arguments in favour of monetary policy easing this year. The data release also showed industrial output falling more than expected in February.

BGK analysts said Thursday's data did not weigh on the zloty, but recent sessions suggested a growing risk of the zloty weakening beyond the 4.20 level.

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