Czech crown up on robust trade data, but seen soft

...reached more than treble the market forecast and pointed at sustained healthy economic growth.

The crown firmed as high as 27.925 per euro after the report on a 13.61 billion crown ($648.1 million) monthly trade surplus in February [ID:nL0424065], from opening levels around 28. It was trading at 27.955 by 1530 GMT.

"The figure points to good first-quarter GDP data, which is also a supportive for the crown," said Pavel Sobisek, economist at Unicredit Markets & Investment Banking.

The robust trade data helped the crown resist a near 1 percent drop in the neighbouring Slovak crown after the Slovak central bank's second market intervention to curb its currency's strength in as many weeks [ID:nL04306239].

But analysts said low yields were reducing the allure of holding Czech crowns and conversely, could lead investors to re-build selling positions in the currency to raise funds for carry trade investments in high-yielding emerging market assets.

Many believe the crown looks unlikely to break a 27.90 euro support in the near-term despite buoyant exports which have boosted the 12-month rolling trade surplus to some 1.6-1.7 percent of gross domestic product.

Miroslav Plojhar, chief economist at Citibank, predicted the crown would weaken to 28.7-29.0 per euro in the medium-term on the back of rising profit repatriation, low investment inflows and renewed popularity of carry trades funded from the currency.

Besides, the leftist opposition Social Democrats' rebuff of the government's tax and spending reform plans [ID:nL04498675] frayed market nerves over their fate, as coalition parties have just half the seats in the parliament.

"With interest rates remaining low for at least the next three months the mere hope of fiscal reform does not by itself provide a convincing enough reason to turn crown bullish," said Nigel Rendell, analyst at Calyon bank.

At 2.50 percent, the Czech policy rate is the lowest in the European Union, ranking the crown among the world's three most popular funding currencies alongside the Japanese yen and Swiss franc.