CEE MARKETS-Polish bond yield sets 4-year low, currencies rise despite firm dollar
By Sandor Peto and Alicja Ptak
BUDAPEST/WARSAW, June 14 (Reuters) - Poland's 10-year government bond yield sank to its lowest level in more than four years on Friday after an attack on two oil tankers in the Gulf, which the United States blamed on Iran, led to global buying of less risky assets.
Tehran denied the allegation following the attacks on Thursday, but concerns grew about a new U.S.-Iranian confrontation.
The Polish paper PL111498=PW traded at 2.3895% at 0843 GMT, down 3 basis points from Thursday's close.
"(There is a) big drop in yields worldwide, (and) the rising presence of foreign investors dragged (Polish) yields down," said Michal Zak, dealer at mBank.
"Yesterday's (Polish government bond) auction apparently has not covered all positions, if only a day after we see a 10 basis point drop," he added, referring to the fall in yield from Thursday's peak.
Other Central European bond yields also dropped, and currencies mainly firmed slightly, despite a rebound in U.S. yields and the dollar .DXY against major currencies, partly after better-then-expected U.S. retail sales data.
In recent weeks, dollar sales have helped the region's main currencies to firm, and on Friday the zloty EURPLN= touched a 10-month high against the euro at 4.2525, and the Czech crown EURCZK= a 9-month high at 25.523.
"The reverse correlation with the dollar does not work 100 percent. There is hardly any trade in local markets right now, this is a sleepy Friday," one Budapest-based dealer said.
"After the retail figures... the first U.S. rate cut may come later, but the expectation is still for cuts."
Despite a rise in U.S. Treasury bond yields, German yields remained lower, though the 10-year yield was off record lows touched earlier in the session.
Although a surge in wages in the region is pushing consumer prices higher, Poland has the lowest annual inflation among Central Europe's main economies - revised up to 2.4 percent for May on Friday.
Polish rate setter Jerzy Osiatynski said the central bank may need to start to increase its record low interest rates next year, but that in 2019 borrowing costs would not change.
Hungary's 10-year yield was fixed lower by 5 basis points from Thursday's fixing HUBONDFIX at 2.74%.
The forint EURHUF= firmed 0.1 percentto 321.8 versus the euro.
AT 1517 CET
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(Additional reporting by Jason Hovet in Prague; Editing by Kirsten Donovan and Gareth Jones)
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