030401

~~~~~((#))016002000g-Government & Corporate Bonds

~~~~~((#))003002000g-Currency Markets (World)

Czech crown slips to 13-months low against euro, bonds rise

PRAGUE: The Czech crown dipped against Europe's single currency on Monday, driven by a generally stronger euro globally and some selling by investors shorting the Czech unit to buy into the higher-yielding Slovak currency.

The crown traded at 31.990 to the euro at 1333 GMT, hitting the lowest level in more than 13 months and weakening by more than a quarter percent from 31.900 on Friday.

"It's been driven mainly by the euro-dollar movements. Also there are some Czech/Slovak trades that may be running through the market," said ING trader Josef Jericha.

"In short, everybody sees the euro-crown higher (the crown weakening to the euro), so there are also some hedging trades."

Investors have been taking advantage of record low Czech interest rates, on a par with the euro zone, to borrow in the Czech crown to pile into higher-yielding central European units such as the Slovak crown which has been particularly in vogue.

With the coming days free of any major Czech macroeconomic data releases, analysts said the crown will likely ride on the coattails of the euro's moves on global markets, and could stay under pressure as long as the euro gains against the dollar on fears of a protracted war in Iraq.

Some analyst said the crown could now drop further and beyond the psychological 32 per euro mark after breaking through the key technical euro resistance at around 31.950 on Monday.

Prime Minister Vladimir Spidla's success in beating off a challenge to the leadership of its Social Democrats at a weekend congress failed to lend much support to the crown as his narrow margin of victory -- just 26 more votes than he needed -- is unlikely to silence his critics.

Benchmark state bonds rose, sending yields lower across the board, as investors around the globe scurried into the safe-haven of the debt markets amid increasing pessimism that the war in Iraq would end quickly.

MARKET SNAPSHOT AT 1333 GMT

Crown/euro at 31.990 from 31.900 late on Friday.

Crown/dollar at 29.380 from 29.620.

2-year bond yield due February 2005 down one basis points to 2.52 percent.

5-year yield due March 2008 down eight basis points to 3.00 percent.

9-year yield due October 2011 down nine basis points to 3.74 percent.-Reuters