Czech crown gains, tracks region, eyes govt talks

PRAGUE, Oct 11 (Reuters) - The Czech crown inched higher versus the euro in morning trade on Wednesday, tracking a rise in the neighbouring Slovak currency fed by a bullish mood in central European markets.

The crown rose nearly a quarter of a percent on the day to 28.152 per euro <0#EURCZK=> by 0845 GMT, booking mild gains for the third successive session. The Slovak crown firmed to all-time highs in morning trade <EURSKK=> [ID:nL11707552].

But analysts saw little chance for the crown to break through a key euro support at around 28.100 before Thursday's launch of political talks on a new government and Friday's release of August current account numbers <ECONCZ>.

The centre-right minority government of Prime Minister Mirek Topolanek is due to formally resign later in the day, after losing a parliamentary confidence vote last week.

President Vaclav Klaus will start meeting leaders of all five parliamentary parties from Thursday but is not expected to pick a new prime minister before the municipal and Senate elections at the end of this month.

"We expect markets to continue to ignore the political turmoil in the short-term but the medium-term impact of the protracted deadlock is negative," said Miroslav Plojhar, chief analyst at Citibank in Prague.

"While the crown would be little affected by politics and the budget in our view, long-dated yields are likely to rise."

Klaus' aides have suggested the president would try to broker a deal between parties on a caretaker, interim cabinet that would lead the country to early polls to end political stalemate caused by an inconclusive general election in June.

----------------- MARKET SNAPSHOT AT 0843 GMT ----------------- Crown/euro <EURCZK=> last deals at 28.152 (+0.22 pct) Crown/dollar <CZK=> at 22.439 bid (+0.17 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.64 pct bid (-3 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.85 pct bid (flat)

5-yr CZK/EUR mid yield spread <DE114147=> -9 bps (vs -7) 10-yr CZK/EUR mid yield spread <DE113529=> 5 bps (vs 5)

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 MORNING