RPT-Czech crown seen flat near-term, firmer in 12 mths

(Repeats story published on Nov 16)

PRAGUE (Reuters) - The Czech crown is likely to hold steady versus the euro over the next three months, but will resume its firming and hit new record highs within 12 months, a Reuters poll showed on Thursday. Eighteen market watchers participating in the survey gave a median forecast of 28.20 to the euro <0#EURCZK=> for one month from now and 28.08 for the three-month outlook, compared with Thursday's level of 28.00 per euro.

Their median forecast saw the crown re-testing all-time highs at 27.90 against the euro in six months from now, and firming further to 27.70 in a year from now.

Buoyant sentiment, driven by expectations of a soft landing in the U.S. economy which spurred investors to take risks on emerging markets, and a foreign trade surplus helped the crown scale a record high of 27.875 per euro on Nov. 6.

"We believe a widening interest-rate differential will slow the crown's appreciation in the upcoming weeks," said Jan Cermak, a research analyst at CSOB, the country's biggest bank.

CSOB forecasts a crown drop to 28.45 per euro within one month, before it claws its way back to 27.70 within 12 months.

The key Czech policy rate has held at 2.50 percent, a record 75 basis points below the euro zone equivalent, but the gap is set to widen to 100 basis points in December when markets widely expect the European Central Bank to raise its interest rates.

Conversely, Czech monetary policymakers are forecast to keep borrowing costs on hold through the year-end and raise them in January at the earliest, as the firm crown helps contain price pressures fed by economic growth of about 6 percent annually.

The new forecasts show that market expectations have shifted towards a slightly stronger crown after the currency's bull run early this month, despite low interest rates and a parliamentary and reform gridlock since a general election in June.

A similar foreign exchange poll last month put the crown at 28.34 to the euro on the one-month, 28.18 on the three-month and 28.00 on the six-month horizon.

The 12-month median forecast for the crown did not change.

"We remain cautiously bullish on the crown -- our target is 27 at the end of 2007 -- due to an envisaged positive trade balance, higher inflow of EU money, and a closing of the negative interest rate differential against the euro area during next year," said Miroslav Plojhar, chief economist at Citibank.

((For TABLE detailing analysts' forecasts, double click on <CZ/ECON07>))

((Reporting by Mirka Krufova; Writing 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))

Keywords: MARKETS CZECH CROWN