FX gets relief from falling core rate hike bets

Central Eastern European currencies held near this week's highs on Friday, after weaker than expected U.S. labour data eased expectations of interest rate hikes in core markets.

The dollar fell towards its biggest weekly loss in 12 weeks on Friday after a tepid U.S. jobs report cooled market expectations for a near-term Federal Reserve interest rate hike.

Data earlier this week showed that euro zone inflation eased last month far more than expected, further curbing pressure on the European Central Bank to raise interest rates again this month to offset quick price growth.

Analysts said the easing expectations for higher interest rates in core markets helped Central and Eastern European currencies such as the zloty ahead of the National Bank of Poland (NBP) policy meeting next week.

"This favors the perception of the Polish zloty, which has recovered some of its losses against both the euro and the dollar. In this context, the expected dovish rhetoric from the NBP next week may not translate into a retest of the 4.30/EUR level," ING Bank Slaski analysts wrote in a note.

They added that the 4.30 level remained a key resistance, and only a decisive move past it could weaken the zloty further, while consolidation below this level was more likely in the coming days.

The Polish zloty OANDA:EURPLN edged 0.05% lower against the euro, trading at 4.2855 by 0900 GMT, just off this week's high set on Thursday. It had briefly slipped past the 4.30 level for the first time since March earlier this week.

In Hungary, the forint FX:EURHUF firmed 0.1% to 353.60 per euro.

"The euro-forint exchange rate fell below the 355 level again yesterday afternoon after weaker-than-expected labour market data was released in the United States," brokerage Equilor said in a note.

"The 355 level is again forming resistance, while the 30-day moving average at 353.93 provides short-term support, with a stronger level unchanged at 350."

Elsewhere, the Czech crown OANDA:EURCZK edged 0.07% lower against the euro to 24.20.