Central European stocks and currencies weaken on fears of Fed tapering

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By Anita Komuves BUDAPEST, Aug 19 - Central European stocks and currencies weakened on Thursday as worries about a sooner than expected tapering by the U.S. Federal Reserve and the spread of the coronavirus hit risk appetite, strengthened the dollar and put pressure on emerging markets CEE equities tracked a fall in European and Asian stocks as minutes of the latest Federal Reserve policy meeting that were published on Wednesday gave the impression of a sudden cut in its pandemic-era bond buying program. Prague and Warsaw stocks slid around 1.5% respectively, while Prague had 1% lower trade. Bucharest has dropped 0.3%. The Czech crown weakened to a near-by-two week low, dropping 0.15% to 25.492 per euro. The currency failed to get a bump from comments on Wednesday from Central Bank Governor Jiri Rusnok, who said he was among those who began considering a bigger rate hike at the bank's last meeting. Markets have speculated that there was a chance the Bank could lift rates by 50 basis points, instead of 25 basis point, at its next meeting after data last week showed a spike in inflation The Hungarian forint dipped to 351.30 per euro in low liquidity ahead of the national holiday in the country on Friday, two FX traders in Budapest said. The next week's central bank meeting could strengthen the forint, possibly beyond the 350 - level, one trader said. Further signs of later-than-expected tapering by the Fed, though, could halt those gains. A Reuters poll of analysts expects the National Bank of Hungary to raise its benchmark rate for Tuesday to 1.5% by a further 30 basis points. The Polish zloty led losses, trading for 0.55% and weakening at 4.5826 per euro. At the turn of August and September, the risk that the rate break even above 4.60 is significant, taking into account, for example, the attitude of NBP, which has still not initiated rate hikes, ING Bank wrote. On Wednesday, the Polish Central Bank bought bonds worth 1.05 billion zlotys in a QE operation, much lower than what it was in the prior month.