Czech crown slips to 3-week low as region weakens

...concerns over a deteriorating external gap and a fragile governing coalition.

The crown slid 0.2 percent to trade at 27.872 per euro by 0825 GMT, extending its losses to 1.7 percent since the currency hit an all-time high of 27.410 in late December and again in early January.

Dealers in Prague and London said the crown breached key technical euro resistance levels over the past few sessions, which could open the scope for a further drop towards the next key level of 28 per euro.

Rising chances that Prime Minister Mirek Topolanek's government will win a crucial parliamentary vote on Friday could help dispel uncertainty which has all but crippled policymaking since an inconclusive election in June last year.

But even if Topolanek wins the vote, analysts said, his government will be too weak to push through reforms of the pension, health, tax and welfare systems the country needs to slash its budget deficit and qualify for membership of the euro.

Topolanek said on Tuesday that two renegade leftist deputies had agreed to abstain from Friday's vote to allow his centre-right coalition to have a majority of votes in the lower house.

"I do not consider the news as positive, because the government will be susceptible to blackmailing (from the opposition deputies)," said David Navratil, economist at Ceska Sporitelna in Prague.

----------------- MARKET SNAPSHOT AT 0820 GMT ----------------- Crown/euro last deals at 27.860 (-0.16 pct) Crown/dollar at 21.540 bid (-0.21 pct)

5-year yield due Oct 2010 3.37 pct bid (+2 bps) 10-year yield due Jan 2016 3.81 pct bid (flat)

5-yr CZK/EUR mid yield spread -61 bps (vs -64) 10-yr CZK/EUR mid yield spread -22 bps (vs -23)

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

[PRAGUE/Reuters/Finance.cz]