Updates after Hungary c.bank decision, comments

By Jason Hovet

PRAGUE, Jan 24 (Reuters) -The forint jumped to a seven-month high on Tuesday, erasing earlier losses, after the Hungarian central bank held rates steady and pledged to keep tight monetary conditions.

The Hungarian currency had weakened going into the bank's policy meeting, with some speculation rate setters could start easing in some way.

The bank, though, held steady on rates and said it would keep using its instruments introduced in mid-October to shore up the forint.

"It is necessary to maintain tight monetary conditions over a prolonged period, which will ensure that inflation expectations are anchored and the inflation target is achieved in a sustainable manner," the bank said.

The forint EURHUF= climbed more than 1% in reaction and was 0.85% up on the day at 392.00 to the euro at 1513 GMT, off a session low beyond 397.

The forint has stayed on the strong side of 400 to the euro so far in 2023, well away from lows above 434 hit last October before the central bank introduced a quick deposit rate and other measures to go with a policy rate at 13%, which bolstered the currency.

On Tuesday, the bank also raised the required reserve ratio for commercial banks to 10% from 5% from April 1. It will also continue to provide foreign currency from its reserves to pay for the country's energy bill.

"As the central bank maintained its hawkish tone in the statement and announced a new liquidity tightening measure, the forint started to post strong gains," Equilor brokerage said, adding that if the forint ends the day firmer than 392, it could open the way to further gains to 389.

Hungarian market rates also ticked on Tuesday.

Central Europe's rate setters have shifted policy into stable rates since the second half of 2022, wary of economic slowdowns even as inflation stays high at double-digit levels.

The shift came after heavy hiking cycles since 2021, before major global central banks like the U.S. Federal Reserve or European Central Bank started tightening.

Elsewhere, the Czech crown has also benefited from more favourable market sentiment due to easing gas prices alleviating worries of an energy crunch this winter, and is trading at more than 14-year highs.

It hit 23.855 to the euro on Monday, touching its highest since October 2008, but was down 0.05% on Tuesday at 23.868.

In Poland, the zloty EURPLN= stayed under pressure at the weak end of its recent range, with some analysts seeing fears over European Union funds as a drag.

Reporting by Jason Hovet in Prague, Krisztina Than in Budapest and Pawel Florkiewicz in Warsaw; Editing by Shailesh Kuber and Jane Merriman

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