Slovak crown steady vs euro, modest gains seen

...gains were probably on the cards in the near term.

The currency firmed to a six-week maximum of 34.250 on Wednesday, buoyed by surprisingly strong 9.5 percent GDP growth for the fourth quarter and improved regional mood.

At 1520 GMT, the crown was traded at 34.320 per euro , unchanged from Wednesday's close.

The unit weakened slightly after the central bank (NBS) rejected all bids in Thursday's auction of its 84-day bills. Total demand was 60.98 billion crowns.

"It seems they do not want the crown to go to stronger levels," said Tatra Banka dealer Boris Somorovsky. "We will see what will happen in the forthcoming repo tender."

The NBS left the market flooded with excess funds at the start of the year to stem firming pressure on the crown, which rose to an all-time high of 34.050 per euro in December. The bank holds its weekly liquidity-draining repo tender on Tuesday.

Dealers said the crown would probably float between 34.200 and 34.500 per euro in the coming days, mainly driven by external factors. But some predicted it might rather advance to the stronger end of the range.

"The dollar is weakening against the euro, which is supportive for emerging markets," said a dealer with a foreign bank in Bratislava. "We could go to 34.200 per euro if this sentiment holds."

But market watchers said further crown advance might be limited by fears of a central bank intervention. The NBS stepped directly in the market on Dec. 28 to knock the unit off its record highs, saying its appreciation had been too fast.

The crown is trading 10.7 percent above the central parity within the Exchange Rate Mechanism 2 (ERM 2), which Slovaks entered in November 2005 as part of its plan to adopt the euro in 2009. ------------------ MARKET SNAPSHOT AT 1520 GMT ----------------- Crown/euro unchanged from 34.320 on Wednesday Crown/dollar 26.145 vs 26.122 (-0.09 pct) 5-yr govt bond yield 4.300/137 vs 4.318/097 pct 7-yr govt bond yield 4.280/200 vs 4.374/154 pct ---------------------------------------------------------------

[BRATISLAVA/Reuters/Finance.cz]