By Sandor Peto
BUDAPEST (Reuters) - Central European currencies are expected to extend last year's gains in 2018, led by the Czech crown, as the region's economies roar ahead without much worry that they will overheat.
The crown and the Polish zloty were the world's top-performing currencies last year. Both gained more than 5 percent against the euro and about 20 percent versus the dollar.
Their gains were much bigger, especially for the zloty, than analysts projected in a Reuters poll a year ago.
According to a new Jan. 2-4 Reuters poll of analysts and foreign exchange strategists, the crown (EURCZK=) will strengthen further and gain 2.4 percent against the euro relative to the end of last year, to 24.95, by the end of 2018.
The zloty (EURPLN=) and the forint (EURHUF=) are expected to gain about one percent this year, to 4.13 and 307.5, respectively, by the end of 2018.
A rally in the first sessions of the year, fueled by a selling of the dollar in global markets, has brought the latter two currencies near the projected end-year levels.
But those gains are overdone, and the currencies are expected to give up some ground in the short term, said DZ Bank's Sandra Striffler, who was the best forecaster for the region's currencies on the one-month horizon last year.
"But if more and more investors return from holidays, other issues will gain the upper hand again, at the expense of the zloty and the forint," she said.
In Hungary, the central bank continues to loosen monetary policy before elections in April or May. Meanwhile, Warsaw's tension with Brussels over Poland's judiciary reforms may put pressure on the zloty in the next months.
But over the full year, the crown and the zloty could repeat last year's strong performance, Striffler said.
Analysts said the main factors for currency gains were robust growth in the region and its main trade partner, the euro zone, and expectations monetary policy would tighten in Europe.
Hungary's central bank is unlikely to lift its main rate this year and next, but its economic growth and current account surpluses buoy the forint.
"The central bank ... is running out of loosening tools and from the second half, it will not be able to prevent a forint rise," said Peter Virovacz, analyst of ING. "It will not care, either ... as a stronger forint can keep a possible inflation rise at bay."
In Romania, where a robust wage rise is fuelling worries of economic overheating, the leu (EURRON=) is not expected to strengthen this year, after shedding about 3 percent versus the euro last year.
The poll sees Serbia's dinar (EURRSD=) easing 1.3 percent this year, to 120 against the euro.