Czech crown sustains gains before Aug trade data

PRAGUE, Oct 5 (Reuters) - The Czech crown held on to most of its gains after matching one-month highs versus the euro on Thursday, as investor attention switched to upcoming August foreign trade data for market direction.

The crown traded quarter of a percent higher on the day at 28.190 per euro <0#EURCZK=> by 1431 GMT, staying within sight of a one-month high of 28.181.

Some analysts said a favourable trade report, due out at 0700 GMT on Friday, could help the crown gain more ground.

A Reuters poll produced a median forecast of a 2.25 billion crown trade balance shortfall <CZFTB=ECI>, compared with a 1.22 billion gap in July but an improvement over the 4.45 billion deficit in August 2005.

ECB raised interest rates to 3.25 percent on Thursday, reinstating a 75 basis point discount to the Czech policy rate which the central bank raised by quarter of a percentage point to 2.50 percent last week.

A further ECB rate hike would weigh on the crown by increasing its yield disadvantage versus the euro.

Analysts said the crown's advance faced a key technical barrier at around 28.180 per euro, and that the country's political paralysis could yet weigh on the market unless parties agree on a new government or early elections soon.

The rightist minority government was toppled in a parliamentary confidence vote on Tuesday amid a lower house deadlock caused by an inconclusive June general election that saw leftist and centre-right parties both win 100 seats.

"The political deadlock will thus persist for the next couple of weeks. In our view, the crown should remain on the backfoot and rather move back towards 28.40 to the euro," said analysts at Commerzbank in a strategy report.

"However, due to currently improving sentiment towards the region, another dip (in the euro/crown) towards 28.18-28.15 is possible," they added.

----------------- MARKET SNAPSHOT AT 1431 GMT ----------------- Crown/euro <EURCZK=> last deals at 28.190 (+0.26 pct) Crown/dollar <CZK=> at 22.215 bid (+0.25 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.62 pct bid (-5 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.83 pct bid (-1 bps)

5-yr CZK/EUR mid yield spread <DE114147=> -1 bps (vs 5) 10-yr CZK/EUR mid yield spread <DE113529=> 12 bps (vs 15)

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

((Reporting by Marek Petrus, editing by Mike Peacock; prague.newsroom@reuters.com; Reuters Messaging: marek.petrus.reuters.com@reuters.net; +420 224 190 477))

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Keywords: MARKETS CZECH CROWN CLOSE