Lower dividends cap Czech July current account gap

...of dividend payments abroad.

The central bank (CNB) said the current account, a wide measure of trade, services and dividend flows, showed a gap of 8.8 billion crowns ($442.2 million).

That was down from 12.87 billion in June and less than half of the 19.9 billion gap estimated by analysts in a Reuters poll.

The 12-month rolling deficit fell to 3.2 percent of last year's gross domestic product from 3.3 percent in June, according to Reuters calculations.

Analysts said the figure was helped by a change in seasonality of dividend payments by foreign firms, which control a large part of the Czech manufacturing industry.

The deficit on the investment income balance within the current account, which mainly includes the sum of dividends and an estimate of reinvested profits that stay in the country, fell to 10.4 billion from 22.8 billion in June.

"The peak we saw last summer is not being repeated," said David Navratil, an analyst at Ceska Sporitelna.

"This is a factor that should weaken the crown less than last year," he said, adding he saw the currency stagnating or dipping in the coming weeks but firming to a record high of 26.6 to the euro by the end of next year.

The crown has reversed its weakening trend seen early this year, gaining 4.5 percent versus the euro over the summer as investors unwound carry trades that use the low-yielding crown as a funding currency for positions in higher-yielding assets.

Navratil said continued unwinding of carry trades should help the balance of payments in August, although not all the trades may be captured in the data.

Chief Economist Jaromir Sindel at Citibank in Prague said a strong export performance helped the balance and boded well for a crown firming toward 27.30 to the euro by year-end.

The crown showed no immediate reaction to the data, trading at 27.560 on Wednesday.

The financial account showed a 4.2 billion crowns deficit, the second monthly gap so far this year, owing mainly to portfolio outflows of 11.4 billion, mainly in equities.

Net foreign direct investments soared to 22 billion crowns from 2.4 billion in June, surprising on the upside, and including the reinvested profits by foreign firms, already recorded as an outflow on the current account.