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CEE MARKETS-Forint down from multi-month high before central bank meeting

PRAGUE, Dec 15 (Reuters) - Central European currencies mostly drifted lower on Tuesday, with Hungary’s forint retreating from a multi-month high before a central bank meeting likely to give investors further clues to the pace of recovery from the coronavirus pandemic.

Stocks held onto gains, buoyed by global markets even as central Europe faced further economic restrictions during the Christmas shopping season as COVID-19 infections stay up.

Hungary’s central bank is likely to leave interest rates unchanged at 0.6% at its last meeting of 2020.

Markets will eye the bank’s latest inflation and economic forecasts, as Hungary’s economic recovery looks slower than previously expected. The bank last forecast the Hungarian economy would contract up to 6.8% in 2020.

The bank “will focus on adjusting its liquidity tools to lower liquidity at the end of the year, a step that should not be misinterpreted as a monetary policy signal for (the forint)though,” Commerzbank said.

“Hence, the new forecasts could be the main driver for the HUF exchange rate coming out of the meeting today.”

The forint faded 0.2% to 354.37 to the euro by 1020 GMT, after touching its strongest since the end of August in the previous session. Poland’s zloty was flat around 4.44 per euro.

Dealers and analysts have said currencies were falling into ranges and liquidity was softening in the final weeks of 2020 trade, a year in which the main currencies are down 3.5-6.5% after struggling to make up steep losses caused by the outset of the pandemic in the first quarter.

A Reuters poll forecasts the zloty and Czech crown will lead gains next year, the latter helped by expectations the country’s central bank will turn more hawkish than others next year.

The crown was up 0.1% at 26.36 per euro on Tuesday, before the central bank meets on Thursday, and Prague stocks added 0.7%, taking in stride fresh coronavirus restrictions announced by the government on Monday evening.

The country, which has been among Europe’s hardest hit in the second pandemic wave, only just re-opened bars and restaurants earlier this month but will again close establishments from Friday to curb another rise in infections.

Reporting by Jason Hovet in Prague, Anita Komuves in Budapest and Alan Charlish in Warsaw; editing by Larry King

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