* Crown seen weakening against the euro, rebound later
* Percentage drop seen bigger than a month ago
* Poll details on <CZ/ECON07>
By Jan Lopatka
PRAGUE, June 17 (Reuters) - The Czech crown is expected to
weaken four percent versus the euro over the next six months on
profit taking, an expected interest rate hike in Europe and a
weaker economy, a Reuters poll showed on Tuesday.
The 14 analysts in the poll produced a median forecast for
the currency to ease to 25.15 to the euro within six months, a
deeper dip in percentage terms than previously expected but a
stronger level than the 25.7 predicted in May.
The Czech currency has defied analysts' expectations of a
correction in the past months and soared to 24.14 last week -- a
record high, bar a one-off jump to 23.00 in April -- gaining
15.4 percent against the euro over the past year.
The crown has outpaced other central European currencies,
which have also been gaining ground. The Polish zloty has gained
10.9 percent over the past year and the Slovak crown added 10.8
percent, while the Hungarian forint edged up a mere 1.6 percent.
The rise, accelerating this month, has been fed by the Czech
economy's strong growth and exports as well as its safe haven
status, and possibly by currency firming in neighbouring
Slovakia ahead of its euro zone entry next year.
But some temporary cooling is on the cards, analysts said.
"Although we had been rather bullish regarding the Czech
crown, its performance over the past few weeks was much better
than what we had expected," said Radomir Jac, chief analyst at
PPF Asset Management.
"There might be some profit taking on the Czech crown at the
end of second quarter of 2008," he said, adding such a move
might be spurred by expectations the ECB will raise its
benchmark rate by a quarter percentage point to 4.25 percent at
its July 3 meeting.
Analysts have said seasonal outflows of dividends should
also help knock the crown down in the coming months.
The crown's strength has been a major anti-inflationary
factor helping to keep interest rates flat in the past months,
despite rising global oil and food prices.
The Czech central bank has left rates flat at 3.75 percent
since February, a quarter point below the euro zone, forecasting
the firm crown and fading of one-off effects would help cut
price growth back toward the bank's target of 3 percent from 6.8
percent year-on-year in May.
Analysts have increasingly shifted from flat rate calls to
forecast a tightening, but central bank board member Vladimir
Tomsik told Reuters in an interview the crown was a strong
factor in favour of stable rates [].
The poll showed a wide gap between individual forecasts,
illustrating an unsettled market. The strongest forecast for
half a year ahead saw the crown at 23.50, while the weakest
called for 26.0.
The median forecast for one month ahead called for a drop to
24.60. In three months as well as a year ahead, the currency was
seen at 24.95.
-- For a TABLE with poll forecasts, click on []
(Editing by Ruth Pitchford)
