Czech crown touch firmer, looks to rate verdict

...rangebound trading in the run-up to a widely-expected interest rate increase on Thursday.

The crown last dealt at 28.195 per euro as of 0840 GMT, up 0.1 percent from late on Friday.

"The crown's key technical barriers are 28.30 and 28.00 per euro," said Ceska Sporitelna dealer Martin Lobotka. "Especially a breaking of the first one (28.30 per euro) would pose a relatively high risk of a faster weakening back to 28.80 per euro."

Most analysts expect the central bank (CNB) to raise rates by 25 basis points to 3.0 percent at a monthly monetary policy meeting on Thursday.

The bank has left the door open for a rise this month to avert a weak crown and buoyant spending from stoking inflation pressures, analysts in a Reuters survey said [CNB/INT].

"Elevated risk aversion curbs the carry trades and the CNB board might be unanimous on the decision to hike interest rates later this week," KBC bank wrote in a market note. "These are generally the crown-positive factors, which might drive the pair further towards to the EUR/CZK 28.10 area."

Czech rates are the third lowest among developed economies after Japan and Switzerland, and this has turned the crown currency into a popular source of cheap funds for investors.

----------------- MARKET SNAPSHOT AT 0842 GMT ----------------- Crown/euro last deals at 28.195 (+0.07 pct) Crown/dollar at 20.387 bid (+0.01 pct)

5-year yield due Oct 2010 4.27 pct bid (-1 bps) 10-year yield due Jan 2016 4.62 pct bid (flat)

5-yr CZK/EUR mid yield spread -14 bps (vs -16) 10-yr CZK/EUR mid yield spread 21 bps (vs 18)

Current levels versus prior domestic close at 1500 GMT ---------------------------------------------------------------