East European currencies have all reversed a portion of their January losses in February and moved off respective multi-year lows, but the Hungarian forint has been the best performer in the group.

The market now waiting for rate decision and unemployment rate from Hungary this week with deepening deflation having increased the likelihood for another rate cut despite the central bank word to hold rates until the end of this year.

Hungary's currency has rallied 2.5% so far this month way better than the 1% gain in Polish zloty and 0.5% rebound in Icelandic and Danish units.

The forint had touched a record low of 280 last month and then rose to as strong as 266/dollar in February before easing to 268.

Hungary's central bank will announce monetary policy on Tuesday and with deflation worsening in the country, the policymaker is likely to announce a rate cut this time.

While announcing the last of the 2-year long cutting spree in July, that took it to a record low of 2.1%, the Hungarian central bank governor Gyorgy Matolcsy said it was not intending cut further for another year.

"Unless there is a negative shift in inflation trends, then the central bank will keep the base rate at 2.1% until the end of 2015," Gyorgy said.

However, the inflation rate eventually fell to the negative territory and for the past five months it has been below the zero mark. In January, the year-on-year CPI inflation rate of Hungary has dropped to a record low of -1.4% increasing the odds for another rate cut.

The easing cycle that began in August 2012 and was sustained over 24 successive monthly cuts, added up to 490 points with the 20 basis points cut in last July.

Poland's zloty had touched a 6-year low of 3.79 against the dollar in January but then recovered to 3.61 in February before easing towards 3.66.

Iceland's krona had fallen to a 7-year low of 135.30 last month and is now near 132.30, after touching as strong as 131.15 earlier this month.

The Danish krone had plummeted to a more than 11-year low of 6.7074 in January before recovering to 6.4537 this month. It is now holding near 6.5560.