Czech CZK near two-month highs, rate decision eyed

...expectations of a 25 basis point interest rate hike by the central bank (CNB) this week.

The crown rose as high as 28.165 shortly after the open on buying by a foreign bank, dealers said. It last dealt at 28.172 per euro by 0725 GMT, a touch firmer on the day.

"The crown may test firmer levels as the CNB's meeting approaches," said Miroslav Tutter, senior currency dealer at CSOB bank. "Levels around 28.100 constitute important support for the euro."

Most analysts expect the CNB to raise its policy rate to near 5-year high of 3 percent at a monthly monetary policy meeting on Thursday, to prevent a weak crown and buoyant spending from stoking inflation pressures [CNB/INT].

Low Czech rates have turned the crown into a popular source of cheap funds for investors. The currency has shed 2.5 percent so far in 2007, underperforming regional peers.

----------------- MARKET SNAPSHOT AT 0723 GMT ----------------- Crown/euro last deals at 28.172 (+0.03 pct) Crown/dollar at 20.386 bid (-0.01 pct)

5-year yield due Oct 2012 4.29 pct bid (flat) 10-year yield due Apr 2017 4.62 pct bid (flat)

5-yr CZK/EUR mid yield spread -14 bps (vs -14) 10-yr CZK/EUR mid yield spread 19 bps (vs 19)

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