Czech crown slightly weaker, money market eyes PPI

...session.

At 1520 GMT the crown traded at 28.151 , down 0.22 percent from Monday's close.

Analysts said the market was waiting for the Bank of Japan verdict on Wednesday on an interest rate hike, which could put emerging markets under pressure.

The Czech Statistical Bureau is due to release January producer prices at 0800 GMT on Wednesday, with analysts expecting 2.3 percent year-on-year growth.

The data will come on the heels of much lower-than-expected consumer inflation figures last week, which pushed the likelihood of a Czech interest rate hike into the second half, and could have impact on the money market.

"A potential surprise in the form of lower PPI dynamics could put the short end of the curve under pressure again," said Komercni Banka in a report.

Czech rates are the lowest in the EU at 2.5 percent, 100 basis points below the euro zone rates.

The low cost of Czech money has led many investors to prefer to sell the crown for higher-yielding emerging markets assets, with the goal of capturing the interest rate spread.

Many analysts say the odds are strongly against the crown repeating its 6 percent rise against the euro from last year when it became the world's fourth best performing currency.

A widely-forecast rise in benchmark European Central Bank (ECB) rates to 3.75 percent in March [ECB/INT] is set to deepen the crown's yield disadvantage.

The Finance Ministry will offer 6 billion crowns worth of 4-year bonds on Wednesday, bids in the first round of the auction are due at 1100 GMT.

----------------- MARKET SNAPSHOT AT 1520 GMT ----------------- Crown/euro last deals at 28.151 (-0.22 pct) Crown/dollar at 21.411 bid (-0.28 pct)

5-year yield due Oct 2010 3.24 pct bid (3 bps) 10-year yield due Jan 2016 3.73 pct bid (1 bps)

5-yr CZK/EUR mid yield spread -81 bps (vs -83) 10-yr CZK/EUR mid yield spread -35 bps (vs -34)

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

[PRAGUE/Reuters/Finance.cz]