Czech crown slips to two-wk lows on poor c/a data

...7 percent of GDP last year due to hefty profit repatriations.

The crown hit an intraday low of 28.335 before clawing its way back to trade 0.1 percent weaker at 28.285 per euro by 1448 GMT.

The crown also suffered from weakness in other central European markets, led by more than a half a percent drop in the Polish zloty .

The current account deficit swelled to 151.13 billion crowns ($6.95 billion) in 2006 from 61.67 billion in 2005 [ID:nL12853499], a worsening which analysts said might hamper the crown's rise after a 6 percent gain against the euro last year.

"The balance of payments is less favorable for the crown compared to the previous two years. This could support the negative mood on the crown," said David Navratil, analyst at Ceska Sporitelna in Prague.

"However, my estimates show that the current fundamental level is close to 27.7 per euro. Thus, I expect appreciation in the coming weeks," he added.

Investors are waiting for Wednesday's release of January inflation data, calculated under a revised consumer basket, to provide clues about whether the central bank could hold interest rates steady in the near-term as markets expect.

Low Czech rates have inspired investors to prefer to sell the low-yielding crown to fund investment in higher-yielding, mostly emerging markets assets, with the goal of capturing the interest rate spread.

The key Czech rate of 2.50 percent is a record 100 basis points below the European Central Bank equivalent, which markets expect to rise to 3.75 percent in March .

But analysts say a bullish outlook for economic growth of about 6 percent for 2006 and 5 percent for 2007 [ID:nL08301506] would probably help shield the crown from outright weakness.

----------------- MARKET SNAPSHOT AT 1448 GMT ----------------- Crown/euro last deals at 28.285 (-0.12 pct) Crown/dollar at 21.817 bid (-0.50 pct)

5-year yield due Oct 2010 3.34 pct bid (+1 bps) 10-year yield due Jan 2016 3.80 pct bid (+1 bps)

5-yr CZK/EUR mid yield spread -71 bps (vs -73) 10-yr CZK/EUR mid yield spread -31 bps (vs -30)

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

[PRAGUE/Reuters/Finance.cz]