PRAGUE, Oct 9 (Reuters) - The Czech crown hugged a narrow range near record highs versus the euro in morning trade on Tuesday after rising inflation reinforced the prospect of another interest rate hike later this year or early next.
Monday's data showed annual inflation accelerated to a 13-month high of 2.8 percent in September, in line with analysts' forecasts in September, while a drop in September's unemployment rate to a decade low of 6.2 percent pointed to a red hot labour market.
The market is pricing in a 25 basis point rise in the main repo rate from the current five-year high of 3.25 percent in November, but several analysts look for no further tightening this year given the crown's 4.5 percent rally since July.
"A rate hike at the (central bank policymakers') meeting on Oct. 25 is very unlikely," said Viktor Kotlan, chief economist at Ceska Sporitelna, forecasting steady rates through end-2007 and a repo rate rise to 3.75 percent by end-2008.
"The market has converged with our trajectory and the opportunity to play a correction on forward rate agreements (FRA) has disappeared," said Kotlan.
The crown was flat at 27.490 per euro <0#EURCZK=> by 0755 GMT, safely within a range of between 27.40 and 27.70 it has held since scaling an all-time peak of 27.385 on Sept. 17.
The 3X6 FRA <CZK3X6F=>, showing where investors expect three-month lending rates <> to be in three months' time, inched 1 basis point higher to 3.58/64 percent. Three month deposit rates <CZK3MD=> were at 3.50/60 percent. ((Reporting by Marek Petrus; Editing by Ian Jones; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))
---------------------- MARKET SNAPSHOT ------------------------ Crown Currency Latest Prev Pct change Pct change
close on day in 2007 vs Euro <EURCZK=> 27.490 27.481 -0.03 +0.04 vs Dollar <CZK=> 19.558 19.474 -0.43 +6.45
Equities PX Index <> 1,890.2 1,896.1 -0.31 +18.96
Domestic Govt Bonds Latest Prev Yld change Yld change
close on day in 2007
5Y Yield <CZ5YT=RR> 4.17 4.16 +1 bps +92 bps 10Y Yield <CZ10YT=RR> 4.48 4.48 +0 bps +77 bps
Mid Yield Spreads (in bps) Spd change Spd change
on day in 2007
5Y vs <EU5YT=RR> -2 +0 -7 +62 10Y vs <EU10YT=RR> +12 +18 -6 +36 --------------------------------------------------------------- All data taken from Reuters at 0755 GMT. Currency percent change and yield change calculated from prior domestic close at 1500 GMT.
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Keywords: MARKETS CZECH CROWN MORNING
