Slovak crown further down on region, euro rumour

...an early setting of an euro conversion rate for the currency.

The crown traded in a volatile session as low as 34.130 to the euro, its weakest level since its peg to the euro in the exchange rate mechanism ERM-2 was revalued by 8.5 percent in mid-March, before rebounding slightly to 34.050 as of 1330 GMT.

It traded at 33.850 late on Thursday.

"There is profit taking in the whole region, which is mostly felt on the crown," said Tatra Banka trader Milan Cavojec. "It is partly an the effect of the interventions."

The Slovak central bank sold an estimated 2.5 billion euros on the market in March and April interventions aimed at halting fast firming of the crown.

Analysts have said the interventions allowed foreign players to open bigger positions, which has made the crown more vulnerable to changes of sentiment on emerging markets.

The crown also traditionally comes under pressure in April and May as local companies pay dividends to their foreign shareholders, traders said.

In addition, several traders in Bratislava said the crown was also affected by a rumour that its conversion rate to the euro will be fixed in the near future.

Slovakia plans to adopt the euro in 2009, with the conversion rate expected to be set at around mid 2008, but it has yet to meet inflation and fiscal criteria for euro zone entry.

"The rumour is a factor moving the crown, however incredible or improbable it sounds," a foreign bank trader in Bratislava said.

[BRATISLAVA/Reuters/Finance.cz]