CEE MARKETS-Forint headed for biggest weekly drop since March, CEZ below CZK 1,000

By Jason Hovet PRAGUE, May 19 (Reuters) - Hungary's forint fell to a one-month low on Friday as a sharp retreat by central Europe's currencies continued, while a fall in shares of Czech utility CEZ that has wiped billions off its market capitalisation deepened. The forint was headed for its worst weekly performance since mid-March, with a strengthening U.S. dollar leading to a sharp reversal in central European FX markets. Last week, the region had been riding high, with the forint at a more than one-year high. "In characteristic high-beta fashion, the CE3 currencies are now selling off on the back of the weak euro (versus dollar), with the highest-beta – forint – underperforming the most," Commerzbank said, referring to the Czech crown, Polish zloty and forint. With global markets watching whether U.S. politicians can agree on raising the country's debt ceiling and avoid risks of an unprecedented default, the dollar has risen and the euro was at a seven-week low against it, cutting appetite for emerging Europe's currencies. Markets will turn to a Hungarian central bank meeting next week where policymakers may look at cutting its 18% one-day deposit rate that has helped pull the forint away from record lows above 430 per euro last year. A still-favourable risk environment could lead policymakers to loosen despite inflation remaining above 20%. The forint was down 0.5% at 377.40 to the euro at 0844 GMT, off a session low 378.75. Morgan Stanley said it had moved forward its expectations of a 100-basis point cut in the one-day deposit rate, although it saw "a non-negligible 40% subjective probability for the (central bank) to remain patient, in search for confirmation that the improvements in risk perceptions about the Hungarian economy are indeed persistent". The forint was not alone in falling. Poland's zloty was also set for its worst week since March, but managed a slight 0.2% rise on Friday. The Czech crown eased 0.1% to 23.75 per euro. Czech rate markets have seen a shift high on short-dated instruments in the past week, with a 2x5 forward rate agreement now pricing in some chance the central bank there - which had come close to supporting a rate hike at its May meeting - could tighten in June. On stock markets, CEZ fell below 1,000 crowns for the first time since March, extending a sharp loss since the government on Wednesday approved a bill lowering the majority of shareholders needed to approve restructuring of public companies, giving the state an easier avenue to potentially splitting the energy giant. CEZ's market capitalisation has fallen by 71.6 billion crowns ($3.37 billion) as shares have lost 12% in the past two days. ($1 = 21.2420 Czech crowns) CEE SNAPSHO AT MARKETS T 1044 CET CURRENC IES Latest Previou Daily Change s bid close change in 2023 EURCZK Czech EURHUF Hungary 0 0 EURPLN Polish EURRON Romanian EURRSD Serbian 0 0 Note: calcula 1800 daily ted CET change from Latest Previou Daily Change s close change in 2023 .PX Prague 1311.37 1316.21 -0.37% +9.12% 00 .BUX Budapest 46345.7 46371.5 -0.06% +5.83% 5 3 .WIG20 Warsaw <.WIG20 1967.00 1939.90 +1.40% +9.77% > .BETI Buchares 12263.7 12248.6 +0.12% +5.15% t 7 5 Spread Daily vs Bund change in Czech spread Republic CZ2YT= 2-year s CZ5YT= 5-year s CZ10YT s Poland PL2YT= 2-year s PL5YT= 5-year s PL10YT s FORWARD 3x6 6x9 9x12 3M interba nk Czech Hungary Poland Note: are for FRA ask quotes prices *********************************** *************************** (Reporting by Jason Hovet in Prague, Krisztina Than in Budapest, and Alan Charlish in Warsaw; Editing by Alex Richardson)