Czech crown steadies off record highs vs euro

PRAGUE, Nov 7 (Reuters) - The Czech crown dipped against the euro in early trade on Tuesday, stabilising after the previous session's spurt to record highs on expectations of a soft landing and an end to interest rate hikes in the United States.

The crown traded 0.1 percent weaker on the day at 27.970 per euro <0#EURCZK=> by 0839 GMT, having hit a lifetime high of 27.875 on Monday to extend its year-to-date rise to 4 percent.

Analysts said the latest currency rally reflected growing global investor interest in taking on risk in emerging markets offering greater potential for gains, rather than the robust, 6 percent growth in the domestic economy.

Economic data pointing to gradually moderating U.S. growth and steady interest rates have buoyed investor sentiment towards emerging markets whose fortunes rely heavily on global growth.

"On the short-term horizon, the crown -- having breached key technical barriers -- may gain more ground," said analysts at CSOB, the biggest Czech bank.

"It should weaken back to a range of between 28.20-28.40 by the end of the year because of an (expected) further widening of the interest rate gap versus the euro zone," they added in a report to investors.

The Czech crown joined the rally in emerging markets after staying on the back foot for most of October, held back by a five-month parliamentary stand-off and low interest rates, at 2.50 percent a record 75 basis points below the euro zone.

The rate discount would widen further if the European Central Bank raises its main rate to 3.50 percent in December as markets widely expect and the firm crown allows the Czech central bank to hold its key rate steady through the year-end.

----------------- MARKET SNAPSHOT AT 0839 GMT ----------------- Crown/euro <EURCZK=> last deals at 27.970 (-0.09 pct) Crown/dollar <CZK=> at 21.913 bid (+0.42 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.62 pct bid (-1 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.86 pct bid (-2 bps)

5-yr CZK/EUR mid yield spread <DE114147=> -14 bps (vs -14) 10-yr CZK/EUR mid yield spread <DE113529=> 8 bps (vs 9)

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

((Reporting by Marek Petrus; Editing by Gerrard Raven; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))

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Keywords: MARKETS CZECH CROWN OPEN