Czech crown mired at 5-mo lows, seen on back foot

...into emerging markets amid concern over Iran's nuclear programme and high oil prices.

The crown traded 0.1 percent weaker on the session at 28.445 per euro by 0850 GMT, having earlier slid as low as 28.450, a level not seen since late September 2006.

"The crown may be tempted to touch as low as 28.50 per euro," analysts at bank CSOB said in a note to investors.

Neighbouring central European currencies also weakened in morning trade on Tuesday after world powers agreed at a meeting in London on Monday to work on a new U.N. Security Council resolution to apply pressure on Iran over its nuclear programme.

The Czech crown has deepened its losses to 3.6 percent since hitting an all-time high of 27.410 in late December last year.

The low cost of money -- with the 2.50 percent official rate the lowest in the European Union -- 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.

The central bank is expected to leave interest rates flat on Thursday, reflecting lower than expected consumer price growth.

Such a decision would result in a widening of the Czech rate discount versus euro zone rates to a record 125 basis points if the European Central Bank hikes its rates by 25 basis points to 3.75 percent as markets widely expect on March 8.

----------------- MARKET SNAPSHOT AT 0850 GMT ----------------- Crown/euro last deals at 28.445 (-0.07 pct) Crown/dollar at 21.502 bid (+0.34 pct)

5-year yield due Oct 2010 3.24 pct bid 10-year yield due Jan 2016 3.71 pct bid

5-yr CZK/EUR mid yield spread -71 bps 10-yr CZK/EUR mid yield spread -26 bps

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

[PRAGUE/Reuters/Finance.cz]