Czech crown extends rise after breaking key level

...level and building on the previous session's jump of nearly 1 percent.

The crown, a popular source of cheap funds for investors because Czech rates are the lowest in the European Union, gained quarter of a percent on the day to trade at 28.260 per euro by 1425 GMT. It rose as high as 28.241 earlier.

The crown matched its life-time peak around 20.48 to the dollar, which also fell to a record low against the euro on worries about the U.S. economy [FRX/].

"The crown broke through a strong (euro) support level at 28.300. Should (euro/crown) manage to close below this level, then technical analysts would signal room for further appreciation," said Miroslav Frayer, analyst at Komercni Banka.

On Friday, investors will focus on May industrial output data due at 0700 GMT and the May current account balance at 0800 GMT.

Worries over problems in riskier U.S. credit markets prompted investors on Wednesday to pare back carry trades using low-yielding currencies like the crown to invest in high-yield but riskier markets.

Analysts said low rates were likely to hold the crown back from a further sharp rise but urged caution about using the currency heavily for carry trades, partly due to expectations of a 25 basis point interest rate increase to 3 percent this month.

Despite this week's 1.3 percent rise, the crown has remained the worst performing currency in central Europe this year.

It has lost nearly 3 percent in the year to date, while the Slovak crown , the Polish zloty and the Hungarian forint have advanced more than 2 percent over that period.

The Czech policy rate stands at 2.75 percent , a record 125 basis points below the euro zone equivalent, after a 25 basis point hike in May. But markets are pricing in a rise to 4 percent within a year from now to tame resurgent inflation.

----------------- MARKET SNAPSHOT AT 1425 GMT ----------------- Crown/euro last deals at 28.260 (+0.24 pct) Crown/dollar at 20.500 bid (+0.33 pct)

5-year yield due Oct 2010 4.09 pct bid (+2 bps) 10-year yield due Jan 2016 4.47 pct bid (+2 bps)

5-yr CZK/EUR mid yield spread -52 bps (vs -49) 10-yr CZK/EUR mid yield spread -13 bps (vs -12) Current levels versus prior domestic close at 1500 GMT ---------------------------------------------------------------