...spurred demand for European emerging markets' safe haven currency.
The crown rose to 27.740 per euro by 0745 GMT as distress in global credit markets caused investors to pare mostly risky bets in high-yield assets. These had been financed by borrowing in low-yield currencies such as the yen and Czech crown.
"We see investment banks selling euros for crowns. It is not about any levels, but about sentiment and the actual situation in many global markets," said Miroslav Tutter, senior currency dealer at CSOB bank in Prague. "Equities are tumbling, risk aversion is skyrocketing, and it is difficult to see where the crown's rise could face resistance."
The Prague bourse fell 2.9 percent in early trade, in line with other east European equity markets <.MIME00000PUS>.
A growing number of analysts believe the crown is in danger of losing its status as one of the world's most popular funding currencies [ID:nL15263227].
Czech interest rates, which are the lowest in the European Union at 3 percent, lured investors this year into using the crown along with the yen and the Swiss franc as a cheap vehicle for funding carry trades, aimed at profiting from high yields elsewhere.
But this month's sharp sell-offs in global equities and emerging markets after months of strong gains have highlighted the crown's quality as a safe haven currency.
With investors' anxiety over risky investment bets rising and high-yield currencies falling out of vogue, the crown has rallied 3.7 percent from 15-month lows against the euro since the end of June.
Over the past week, the crown has strengthened 1.3 percent versus the euro, lagging a 3.4 percent jump in the yen versus the euro . In contrast the Hungarian forint, central Europe's high-yielder, has fallen 2.9 percent. The crown's strength, coupled with lower-than-expected inflation plus weaker industrial sector expansion, could make central bank (CNB) policymakers think twice about raising interest rates at their Aug. 30 meeting, analysts said.
[PRAGUE/Reuters/Finance.cz]