(Adds quotes, updates prices)
By Jan Lopatka
PRAGUE, April 14 (Reuters) - The Czech crown <EURCZK=>
soared 7.9 percent to all-time highs in thin overnight trading
before dropping back early on Monday, a move that surprised the
market and sparked talk that the central bank may intervene to
move the currency lower.
The crown traded as high as 23.00 to the euro late on Sunday
-- a 7.9 percent rise from the close of trading in Prague on
Friday -- before falling back to 24.930 by 0800 GMT on Monday,
just shy of 24.966 late Friday.
"There was zero liquidity, some (resistance) barriers fell
and people just poured it all in," said Miroslav Tutter, a
senior trader at bank CSOB.
The previous record high was 24.83 on March 4. The crown has
been rising due to fast economic growth in the central European
country, seen as a safe haven with a track record of currency
gains.
The Reuters trading system showed one trade worth just 1
million euros at the 23.00 level. There was a trade of at least
10 million at 23.495 and a trade worth 4 million at 23.500.
The central bank (CNB) had no immediate comment on the
currency move.
Traders said options trading in Asia was behind the move,
and one questioned whether there may have been an trading error.
The crown was 10.7 percent higher from a year ago on Monday
in local currency terms.
The central bank has seen the crown rise as excessive in the
past months. It agreed a deal with the government last week to
curb the currency's strength by removing state foreign currency
revenues from the market, but has shied from intervention.
"As this morning's move so unquestionably and clearly is
unwarranted it creates a test of the CNB's real willingness to
prevent a further slide in EUR/CZK," said Commerzbank analyst
Ulrich Leuchtmann.
"If it stays inactive or again only is willing to agree on
symbolic measures this is an invitation to the market to pull
down EUR/CZK as far as it likes. But perhaps this was a wake up
call for the CNB."
Analyst Lars Christensen from Danske Bank agreed the chances
of intervention have risen, adding the move was a "freak event".
"People were squaring up positions before the IMF (weekend
meeting), there was low liquidity. If it had to happen on any
day of the year, then this was the day. But it is the black swan
that no one expects to go by," he said.
But Citibank analyst Jaromir Sindel said he expected the
central bank to stay put for now and see where the crown rate
settles in a standard liquid market.
"The central bank will wait until it shows what happens next
throughout the week," he said.
"This will influence all the positions closed. It will be
interesting how exporters deal with it... there will be many
trades that had some stop-losses, they will go into new ones, it
will be very interesting."
(Additional reporting by Carolyn Cohn in London)
(Reporting by Jan Lopatka, editing by Ian Jones)
