Slovak crown gains ground vs euro, ignores rate cut

...rate less than some investors had expected, 
and dealers saw room for more firming in the short run. 
    The bank (NBS) cut the key two-week repo rate by 25 basis 
points to 4.50 percent on Tuesday, for the first time in two 
years, to tame firming pressure on the crown. 
    At 1515 GMT, the crown traded at 33.405 per euro, up from 
33.680 before the rate decision . It stood at 33.635 
late on Monday. 
    "Investors are not worried about lower interest rates," said 
VUB bank dealer Laco Benedek. "They have a completely different 
opinion where the exchange rate will be after all the central 
bank steps." 
    Most analysts expected a rate cut, but a slight majority 
favoured a smaller move over a 50 basis-point cut. 
    NBS chief Ivan Sramko said the crown firming after the rate 
cut was not justified, adding the bank was ready to use all 
tools. 
    The bank intervened heavily in the market last week after 
the crown jumped over 3 percent to hit a record high of 32.710 
per euro on the back of its ERM-2 parity revaluation. 
    On Tuesday, the NBS also surprisingly cut the overnight repo 
rate to 2.50 percent from 3.25 percent for draining liquidity, 
which analysts said was another measure to combat the crown. 
    "This is part of the battle against the strong crown," said 
Lucia Steklacova, senior analyst at ING Bank in Bratislava.  
    "It temporarily boosts the effect of repo tenders ... and 
signals that if inflation trends remain positive they will cut 
interest rates by a further 25 basis points," she said. 
    The NBS rejected some bids in its weekly repo tender on 
Tuesday to keep the money market flooded with excess funds and 
deter speculators. 
------------------ MARKET SNAPSHOT AT 1515 GMT ----------------- 
Crown/euro  at 33.405 vs 33.635 on Monday 
Crown/dollar   at 25.018 vs 25.180 
5-yr govt bond  yield 4.096/3.886 pct vs 4.102/3.938 
7-yr govt bond  yield 4.216/4.082 pct vs 4.230/4.084 
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