Czech crown dips on Hungary riots, seen rangebound

PRAGUE, Sept 19 (Reuters) - The Czech crown dipped against the euro in early Tuesday trade as anti-government riots in Hungary soured investor sentiment towards central Europe, but dealers said the currency appeared locked in a narrow range.

The crown held in an exceptionally thin range between 28.450 and 28.490 per euro <0#EURCZK=> since opening. By 0820 GMT, it traded at 28.485, weakening by some 0.2 percent on the session.

A Prague dealer with an international bank said investors were leaning towards selling crowns for euros but activity was muted as the market's attention focused on the Hungarian forint which lost about 1 percent to the euro <EURHUF=> on the day.

Regional sentiment soured after anti-government riots in Hungary, triggered by the leak of a tape on Sunday in which the prime minister urged his party to adopt economic reforms after lying to voters for years to win April's general elections.

"While regional sentiment is looking fragile ... the upside for EUR/CZK looks capped near 28.55, by improved positioning, hopes of a rate hike next week, and a subsidence in fiscal jitters," said Lucy Bethell, strategist at Royal Bank of Scotland in London.

The crown has lost nearly 2 percent since hitting a life-time high of 27.955 per euro in early August, hurt by investor concerns about weakening export momentum and limited prospect of bold reforms to curb a burgeoning budget deficit.

But the central bank (CNB) has opened the door to a possible 25 basis point interest rate hike at its Sept. 27 session, which analysts said could help underpin the currency. The key Czech rate is a record 75 basis points below the euro zone benchmark.

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

----------------- MARKET SNAPSHOT AT 0827 GMT ----------------- Crown/euro <EURCZK=> last deals at 28.485 (-0.16 pct) Crown/dollar <CZK=> at 22.459 bid (-0.24 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.68 pct bid (-3 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.91 pct bid (-1 bps)

5-yr CZK/EUR mid yield spread <DE114147=> -7 bps (vs -5) 10-yr CZK/EUR mid yield spread <DE113529=> 10 bps (vs 10)

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

((Reporting by Marek Petrus; Editing by Chris Pizzey; 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 MORNING