CEE MARKETS-Forint regains ground near 9-month high, Polish yields move up

PRAGUE, May 27 (Reuters) - Hungary’s forint pushed back toward a nine-month high on Thursday and the Czech crown hung around its own multi-month peak, with rate hike expectations in those countries adding support even as a steadying dollar cut some risk appetite.

In bond markets, Polish yields continued to tick up following a Wednesday tender at which the central bank (NBP) bought less than a third of what investors offered to sell, coming after yields recently ticked lower.

Analysts said the lower purchases were not likely a signal of a slow withdrawal from the programme - which has boosted Polish debt markets - but more a reaction to market moves.

“The market was positioning yesterday before the NBP operation that it should be aggressive in line with the NBP comments but that was a market mistake,” said Mateusz Sutowicz, a financial market analyst at Bank Millennium in Warsaw.

“So now the yields are moving up, which is a mid-term direction as the reflationary trend spreads around the world,” Sutowicz added.

With rising inflation around central Europe, where price growth is far outpacing most in the euro zone and is above central banks’ target levels, investors are betting on rising interest rates in the region.

Rate hikes could start in June in Hungary or the Czech Republic, according to recent signals from policymakers and market pricing.

Czech central banker Vojtech Benda was quoted in an interview with Ekonom magazine on Thursday as saying the time when rates will rise has come much closer.

The crown, which has touched its strongest levels since March 2020 in the past week, was down 0.1% at 25.46 to the euro at 0859 GMT.

The forint rose 0.2% to 349.18 versus the euro, not far from its nine-month high of 346.80 reached on May 24.

Hungary’s central bank said this week it was ready to “tighten monetary conditions in a proactive manner” to ensure price stability.

Stock markets were mixed. Prague was up 0.2%.

Czech gunmaker CZG-Ceska Zbrojovka rose almost 5% as it raised its 2021 profit outlook following the acquisition of U.S. brand Colt was completed this month. (Reporting by Jason Hovet in Prague, Anita Komuves in Budapest and Alan Charlish in Warsaw; Editing by Himani Sarkar)