Czech crown dips, driven by SKK, London banks

...the Czech unit.

The crown traded as weak as 27.94 to the euro , from 27.87 late on Monday. It stood at 27.91 at 1010 GMT.

"Regional currencies are slightly under pressure, led by the Slovak, but here clients are selling (euros) above the 27.900," said one Prague dealer.

"So London lightly on the bid, some Czech names lightly on offers, and clients are selling here, so it should be tougher getting tougher toward the 28," said one Prague dealer.

The crown has been losing ground in part thanks to a 100 basis point discount in short-term interest rates versus the euro area, which makes the crown a funding vehicle for taking positions elsewhere in the region.

The crown has been on the back foot this year after hitting all-time highs of 27.41 on December 20, as chances of interest rate hikes in the coming months diminished. The central bank is due to meet on interest rates on Thursday, and no change is expected.

The crown has also failed to win any support from the new centre-right government winning a parliamentary confidence vote late on Friday .

The coalition government led by Mirek Topolanek falls one seat short of a parliamentary majority but squeezed through the vote thanks to abstention of two leftist opposition rebels, ending nearly eight months of political deadlock following an inconclusive election last June.

Analysts have said the government could lack the power to push through its plans to reform the welfare, pension, health and tax systems, and the country could still see an early election ahead of regular polls due in 2010. ----------------- MARKET SNAPSHOT AT 1010 GMT ----------------- Crown/euro at 27.910 from 27.866

Crown/dollar at 21.444 from 21.509

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

[PRAGUE/Reuters/Finance.cz]