Czech crown dips, tests 28.30/euro level

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The crown traded as low as 28.310 to the euro , testing the 28.300 support several traders had said should hold.

It stood at 28.276 at 0920 GMT, from 28.200 late on Monday.

Traders said a U.S. Federal Reserve meeting on Wednesday and a range of U.S. data this week would be the key driver for the market. Strong U.S. data may disperse bets on an interest rate cut there, and put pressure on emerging markets.

"We expect the crown rather around weaker levels, it has the potential to come under pressure in the coming sessions," bank CSOB said in a report.

"However, we see strong resistance at 28.30 and we see breaking this (and holding) as unlikely. Therefore we continue to recommend exporters hedge at these levels."

The crown has been on the back foot since booking all-time highs of 27.410 in December and early January as sentiment toward the region soured.

The crown is increasingly becoming a funding currency due to a 100-basis-point interest rate discount versus the euro zone.

The Czech central bank confirmed a relatively doveish policy outlook last week when it lowered its inflation forecast and said it saw interest rates flat in the coming months ahead of a tightening. ------------------ MARKET SNAPSHOT AT 0920 GMT ----------------- Crown/euro last deals at 28.276 (-0.18 pct) Crown/dollar at 21.805 bid (-0.03 pct)

5-year yield due Oct 2010 3.47 pct bid (3 bps) 10-year yield due Jan 2016 3.86 pct bid (-1 bps)

5-yr CZK/EUR mid yield spread -58 bps (vs -63) 10-yr CZK/EUR mid yield spread -25 bps (vs -25)

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

[PRAGUE/Reuters/Finance.cz]