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Czech crown expected to be top gainer in CEE

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By Jason Hovet

PRAGUE, April 4 (Reuters) -The Czech crown is likely to be the lone gainer among central Europe's currencies in the coming year, with peers either running out of room to rally or facing lingering risks, a Reuters poll showed on Thursday.

Currencies in central Europe have diverged in 2024 but are seen falling into a holding pattern in coming months.

In the Czech Republic and Hungary, interest rate cuts have led to losses of more than 2% for the crown and forint, respectively. The zloty, however, is up over 1% and near four-year highs as the Polish central bank has paused monetary easing.

The poll, though, saw the zloty ending its rally and straddling levels just off its peak of 4.275 per euro hit in March. The forint, too, will be unable to break away from a low near 400 per euro and is unlikely to better a 2024 high beyond 380.

In coming months, the crown is also likely to hover around 25.30 per euro, where it has stabilised since hitting a two-year low past 25.50 per euro in February.

The median forecast saw the crown EURCZK= at that level by the end of the quarter, before firming to 25.20 per euro in the third quarter. In 12 months, the crown should gain 1.9% over Tuesday's close to 24.88, according to the poll.

"The main reason for the expected appreciation... is the gradual recovery of domestic economic activity this year," Komercni Banka economist Jaromir Gec said.

In Poland, expectations of a renewal of European Union funds that had previously been locked over disputes with Brussels are also supportingthe zloty and could it give a short-term boost.

However, the median forecast in the poll saw the zloty EURPLN= at around 4.30 per euro in the coming quarters, weakerthan a Tuesday close of 4.29.

"The foundations behind the zloty remain strong," ING said, adding appreciation to 4.20 this quarter was still possible. "Poland maintains a current account surplus, and the first large tranche of funds from (the EU) will soon arrive."

The forint EURHUF=, meanwhile, was seen stuck around 395 to the euro this quarter and in 12 months' time. It could face a renewed test of the psychological level of 400, which it last weakened past in March 2023.

Besides facing the most aggressive rate-cutting pace in Europe, the forint has been shaken by battles between the central bank and government, and lingering disputes between Budapest and Brussels.

"The major political risks will persist for a while, which is why we now see EUR/HUF breaking through 400 in Q2," ING economist Peter Virovacz said.

In Romania, the leu EURRON= should also slowly ease in coming months and fall 1.2% in the next year, past a level of 5.00 to the euro, with interest rate cuts there also possibly starting.

(For other stories from the April Reuters foreign exchange poll: nL3N3GB1X9)

Reporting by Jason Hovet in Prague and Pawel Florkiewicz in Warsaw; Polling by Devayani Sathyan, Vijayalakshmi Srinivasan and Sarupya Ganguly; Editing by Alexandra Hudson


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