Czech crown probes support as zloty falls

PRAGUE, Sept 22 (Reuters) - The Czech crown dropped to test support at 28.50 to the euro <EURCZK=> on Friday morning after the collapse of the Polish government coalition pushed currencies down across the region.

The crown traded at 28.495 at 0812 GMT, down from 28.44 late on Thursday. It had fallen as low as 28.52 in early trade.

"The zloty will be driving the central Euroepan curencies today," CSOB bank said in a morning report. "If the zloty falls further, euro/crown can move above 28.50."

It forecast the crown would remain in a range of 28.400-600.

Exporters hedging their future foreign currency income on crown dips have propped up the unit in recent sessions, and the 28.50 level was not convincingly broken in the past few days.

The central bank board is due to discuss interest rates on Sept. 27, and some analysts expect it to tighten policy by 25 basis points. But most in the market still expect the bank to hold off on any hike until at least October.

The bank last raised rates, by 25 basis points, in July to contain inflation in an economy growing at record 6 percent.

The crown has lost nearly 2 percent since hitting a lifetime high of 27.955 per euro in early August.

The main drags on the crown have been weaker export momentum and a worsening of the fiscal outlook, against a background of political stalemate that has hampered policy making and made prospects for the 2007 budget unclear.

The government is due to discuss the central government budget, the main part of the public sector finances, on Monday. ----------------- MARKET SNAPSHOT AT 0819 GMT ----------------- Crown/euro <EURCZK=> last deals at 28.490 (-0.26 pct) Crown/dollar <CZK=> at 22.212 bid (0.41 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.67 pct bid (-1 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.88 pct bid (1 bps)

5-yr CZK/EUR mid yield spread <DE114147=> 3 bps (vs -1) 10-yr CZK/EUR mid yield spread <DE113529=> 16 bps (vs 11)

Current levels versus prior domestic close at 1500 GMT --------------------------------------------------------------- ((Reporting by Jan Lopatka, editing by Gill Tudor; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474))

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Keywords: MARKETS CZECH CROWN MORNING