CEE MARKETS-Hungary's forint extends losses in thin market, underperforms region

By Anita Komuves BUDAPEST, July 4 (Reuters) - The Hungarian forint eased on Monday in low liquidity, underperforming regional peers, as it was under pressure by a series of factors including high inflation and a lack of agreement with the European Union over recovery funds. "There is little interest in the forint today as U.S. markets will stay closed, so any trade can bring bigger moves in the rate ... but the direction points towards weakening," an FX trader in Budapest said. Markets in the United States will stay closed for the Independence Day holiday. The forint weakened 0.31% and was trading at 401.40 per euro, giving up some of its gains seen after the central bank's hefty 185-basis-point rate hike on Tuesday. Last Monday the currency hit an all-time low of 404.50 versus the euro. The forint has been the worst performer in central Europe so far this year, losing more than 8% versus the euro as it was pressured by Hungary's twin deficits, soaring inflation, windfall taxes and a lack of agreement between the Hungarian government and Brussels over the release of EU funds. "Despite carrying out the largest tightening cycle in the region, Hungarian assets have remained under pressure due to several political and geopolitical risks," Peter Virovacz, senior analyst at ING, wrote in a note. "But we continue to watch headlines signalling a turnaround in the Rule of Law and EU funds disputes that should unlock the hidden potential of the forint in the second half of the year." Long-term government bond yields ticked higher on Monday as they were pressured by the forint's weakening, a fixed-income trader said. The yield on the 10-year bond was about 7.95%. The Czech crown edged up 0.04% to 24.745 as Governor Ales Michl said the Czech National Bank should keep its interest rates at an elevated level in order to fulfill its main goal, which is to bring down inflation. Elsewhere, the Polish zloty was little moved as markets were eyeing the meeting of the central bank on Thursday where a Reuters poll of analyst expects the main interest rate to be raised by 75 basis points to 6.75%. Poland's stock index lost 0.79%, underperforming the region as its banks index fell around 3% after the leader of Poland's ruling party Jaroslaw Kaczynski said on Saturday that banks should be taxed more if they don't start offering savers better interest on their deposits. CEE SNAPSH AT MARKETS OT 1045 CET CURREN CIES Latest Previo Daily Change us bid close change in 2022 EURCZK Czech 0 0 % % EURHUF Hungary 00 00 EURPLN Polish % EURRON Romania % % EURHRK Croatia % EURRSD Serbian 00 00 % % Note: calculated from 1800 daily CET change Latest Previo Daily Change us close change in 2022 .PX Prague 1212.6 1217.9 -0.43% 5 100 .BUX Budapes 39662. 39331. +0.84 -21.80 t 16 33 % % .WIG20 Warsaw <.WIG20 1675.4 1688.8 -0.79% -26.09 > 3 5 % .BETI Buchare 12480. 12375. +0.85 -4.45% st 35 32 % .SBITO Ljublja <.SBITO 1125.6 1118.6 +0.63 -10.34 P na P> 6 0 % % .CRBEX Zagreb <.CRBEX 2009.1 2009.9 -0.04% -3.37% > 9 6 .BELEX Belgrad <.BELEX 838.51 837.51 +0.12 +2.16 15 e 15> % % .SOFIX Sofia <.SOFIX 611.79 609.99 +0.30 -3.76% > % Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republi c CZ2YT= 0 ps CZ5YT= ps CZ10YT 0 ps Poland PL2YT= ps ps PL5YT= ps s PL10YT ps FORWARD 3x6 6x9 9x12 3M interb ank Czech Hungary Poland Note: are for ask FRA prices quotes **************************************** ********************** (Additional reporting by Alan Charlish in Warsaw; Editing by Maju Samuel)