Czech crown drops to 2-week low, lags region

PRAGUE, Oct 12 (Reuters) - The Czech crown touched an October low against the euro on Thursday after minutes from the U.S. Federal Reserve meeting dampened emerging markets and as players took bets before current account data due out on Friday.

The crown dipped to 28.36 to the euro, its lowest since Sept. 29, before recovering to 28.28 at 1452 GMT, down from 28.22 late on Wednesday.

The Fed minutes showed policymakers were still concerned about inflation, diminishing expectations of a U.S. interest rate cut, which had supported emerging market assets.

On the Czech domestic front, anxiety before August balance of payments data due at 0800 GMT on Friday was another factor.

"Today's weakening is not surprising, given we will receive August balance of payments data," Komercni Banka said in a report to investors. "We expect another significant deficit," it said, adding that breaking the 28.40 level would open room toward 28.55/60.

A Reuters poll of analysts showed the market expected a 14.7 billion crown monthly gap on the current account.

The crown did not react to morning data showing industrial output rose 7.4 percent year-on-year in August, lagging forecasts of a double-digit expansion.

The Czech Republic has also suffered from political instability, extended after the new centre-right cabinet lost a confidence vote last week and resigned on Wednesday.

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

Klaus has said the best way out of the crisis would be a caretaker cabinet that would lead the country to early polls to end the political stalemate caused by an inconclusive general election in June. ----------------- MARKET SNAPSHOT AT 1452 GMT ----------------- Crown/euro <EURCZK=> last deals at 28.280 (-0.23 pct) Crown/dollar <CZK=> at 22.536 bid (-0.31 pct)

5-year yield due Oct 2010 <CZ5YT=RR> 3.70 pct bid (7 bps) 10-year yield due Jan 2016 <CZ10YT=RR> 3.88 pct bid (3 bps)

5-yr CZK/EUR mid yield spread <DE114147=> -2 bps (vs -10) 10-yr CZK/EUR mid yield spread <DE113529=> 9 bps (vs 6)

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

((Reporting by Jan Lopatka, editing by David Stamp; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474))

- For previous updates on Czech currency moves click on [CZK/]

--------ECONOMIC DATA RELEASES (double click to access)-------- LIVE Czech economic data releases <ECONCZ> INSTANT VIEWs on Czech economic data [CZ/INSTANT]

---------------------------RELATED NEWS------------------------ Czech Market Debt [CZ-DBT] Czech forex [CZ-FRX]

Hungary Market Report [FT/] Poland Market Report [PLN/] Emerging Market Debt [EMRG/DBT] Emerging forex [EMRG/FRX] All Emerging Markets news [EMRG] CEE indicators [CONV/DIARY] All East Europe News [EEU] E.Europe equities [.CEE] TOP NEWS -- Emerging markets [TOP/EMRG] TOP NEWS -- Convergence watch [TOP/EAST] Czech indicators [CZ/ECI] Hungary indicators [HU/ECI] Slovak indicators [SK/ECI] Polish indicators [PL/ECI] --------------------LIVE PRICES & DATA------------------------- Crown Spot Against EUR <EURCZK=> Against USD <CZK=> Czech Bonds <0#CZBMK=> C.Europe Bonds <CEEBONDS> Crown FRAs <CZKFRA=TTKL> Central Bank Fixings <CNB02> Contrib. Cross Rates <CZKX1=> Czech Central Bank <CNB01> -------------------------------------------------------------- HOW TO FIND INFORMATION YOU NEED

|<REUTERS> | <NEWS> | <PHONE/HELP> |

|<EQUITY> | <BONDS>| <MONEY> | <COMMODITY> | <ENERGY> ---------------------------------------------------------------

Keywords: MARKETS CZECH CROWN CLOSE