Czech crown opens tad lower as politics in limbo

PRAGUE, Oct 4 (Reuters) - The Czech crown inched lower versus the euro at opening on Wednesday, a day after the rightist government lost a parliamentary confidence vote as markets expected, leaving the country in political limbo.

The crown traded 0.1 percent weaker at 28.270 per euro <0#EURCZK=> by 0655 GMT, having hit a near one-month high of 28.181 in the previous session.

Prime Minister Mirek Topolanek's rightist minority government was toppled in a parliamentary confidence vote late on Tuesday and pledged to resign next week, edging the country closer to early elections.

Parliament has been deadlocked since a June election with leftist and centre-right parties each controlling 100 seats. Topolanek was expected to lose the vote since the two sides failed to reach a deal on support.

"Early elections are the best case scenario for the crown from here, given the likelihood that they would provide the centre-right with a mandate to reform taxes and continue privatisations," said Lucy Bethell at Royal Bank of Scotland.

"Of course that will leave the market questioning the Czech Republic's commitment to euro adoption, but we think delays beyond 2010 are in the price, and that the market's focus will switch back to the current account," added the currency strategist in London.

The Czech deadlock has failed to hit markets, with investors instead focusing on a strong economy that shows few ill effects.

Private sector economists and central bank policymakers have said, however, the country needs to ensure reforms to sectors such as healthcare, public finances and pensions remain on track for the adoption of the euro, now seen delayed by a year or two.

----------------- MARKET SNAPSHOT AT 0655 GMT ----------------- Crown/euro <EURCZK=> last deals at 28.270 (-0.09 pct) Crown/dollar <CZK=> at 22.193 bid (-0.19 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.63 pct bid (-4 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.86 pct bid (-1 bps)

5-yr CZK/EUR mid yield spread <DE114147=> -3 bps (vs 2) 10-yr CZK/EUR mid yield spread <DE113529=> 13 bps (vs 15)

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

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

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Keywords: MARKETS CZECH CROWN OPEN