CEE MARKETS-Forint, crown lead currencies higher as investors eye EU-US trade deal

By Krisztina Than and Jason Hovet

BUDAPEST/PRAGUE, July 25 (Reuters) - The Hungarian forint scaled 10-month highs against the euro on Friday while the Czech crown hit its strongest levels since January 2024, supported by hopes of a U.S.-EU trade deal and the yields that the emerging currencies offer to investors.

The forint EURHUF= extended gains from Thursday and led Central European currencies higher by firming 0.4% to 396.25, a level it last reached in September 2024.

The crown EURCZK= traded at 24.53 per euro, its strongest since early 2024.

A Prague trader said a break past 24.50 was possible but room for more gains after that may be limited.

"There is no (Czech) central bank rate cut on the way, and in the event of a successful EU-U.S. agreement it is possible to see (EUR/CZK moving) southward," the trader said.

Jaromir Gec, an economist at Komercni Banka, said the Czech central bank's hawkish stance had resulted in the widening interest rate differential that had been one of the key factors behind the strengthening of the crown.

"This is likely to persist until the end of the summer, probably due to the lack of disinflationary data," he added. "But ... we believe that a further interest rate cut by the CNB in Q4 - which is currently not priced in - could offset some of the crown's recent gains".

The Czech central bank and the National Bank of Hungary have maintained a hawkish stance, the former only cutting twice in the past five meetings and the latter on hold for 10 months, as they are wary of inflation risks.

Hungary's base rate is at 6.5%, while the Czech two-week repo rate is at 3.5% currently, and these relatively high rates have supported the forint and the crown as the European Central Bank gradually cut its main euro rate to 2.0%.

Elsewhere, the Polish zloty EURPLN= traded around its recent levels at 4.255 to the euro.

The European Commission said on Thursday a negotiated trade solution with the United States is within reach while EU members voted to approve counter-tariffs on 93 billion euros ($109 billion) of U.S. goods in the event that talks collapse.