WARSAW, May 28 (Reuters) -Central Europe's currencies held steady on Tuesday, with the zloty near a multi-year high ahead of an inflation reading later in the week, and the Czech crown and Hungarian forint slightly off of their highest levels in months.

"Conditions for emerging market currencies remain favourable, with continued risk-on sentiment and a weaker U.S. dollar," ING analysts wrote in a note, pointing out the rather light calendar for Central Europe.

"Despite the fact that we still see most of the region's currencies overvalued on a short-term basis, the coming days will likely support further CEE FX gains across the board."

By 0846 GMT the Polish zloty EURPLN= traded at 4.2590 per euro, after hitting 4.50 last week, its strongest level since February 2020.

The zloty remains the region's top performer this year, supported by the Poland's stable rates outlook from the central bank and incoming European Union funds.

"Although the EUR/PLN exchange rate is trying to break the level of 4.25, that is the minimum from 2020, it has not been able to break it successfully so far. At the same time failures in the zloty's strengthening did not generate a lasting corrective impulse," Bank Millennium analysts wrote in a note.

They said that while a shallow breach of 4.25 was possible, they expected the currency to stabilise around this level in the coming days.

Poland's stats office will release its flash consumer inflation reading for May on Wednesday.

"The thing is that we do not believe that the Polish CPI reading will change the outlook for NBP interest rates, and thus the valuation of the zloty," Bank Millennium analysts added.

The Hungarian forint EURHUF= traded at 384.50 per euro, slightly off of its almost four-month high of 383.70 hit on Friday.

Last week, Hungary's central bank cut its base rate in line with expectations and said that scope for more easing would be "very very limited" amid strong service sector repricing and other risks.

The Czech crown EURCZK= was at 24.7010 per euro, off the 4-1/2 month high of 24.6050 it opened at on Monday, before easing.

In early May, the Czech central bank also cut its base rate as expected but scaled back the scope for further easing in an economic outlook showing stronger growth and softer inflation this year.

Reporting by Karol Badohal in Warsaw; Editing by Alison Williams

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