Slovak crown hits 3-wk low on rate cut fears

    The Slovak crown weakened 
through a support level of 34.650 per euro on Friday as some 
foreign investors bet on interest rate cuts after 
lower-than-expected December inflation. 
    The crown eased by 0.7 percent to end the local trading at 
at 34.770 to the euro , from 34.525 late on Thursday. 
    "There was a strong move on the crown," said Tatra Banka 
dealer Boris Somorovsky. "Two or three foreign banks were 
selling crowns, and it eased significantly." 
    The crown detached itself from other central European 
currencies, as the Polish zloty and Hungarian forint gained, and 
the Czech crown eased only slightly versus the euro. 
    Lower inflation data for December, released on Friday, along 
with favourable price growth outlook and a recent crown rally 
sparked fears the central bank may cut interest rates, which 
would make crown yields less attractive, traders said. 
    Slovak inflation was 4.2 percent in December, after 4.3 
percent in November, and analysts expected a further 
deceleration to around 3 percent in January. 
    But some market watchers said rate cuts were unlikely in the 
foreseeable future as they still saw risks of Slovakia failing 
to meet the inflation condition for euro adoption in the target 
year of 2009. 
    "Booming domestic demand may prevent inflation declining 
fast enough for the criterion despite the strength of the 
currency," Goldman Sachs economist Istvan Zsoldos said in a 
market note. 
----------------- MARKET SNAPSHOT AT 1530 GMT ----------------- 
 Crown/euro  34.770 vs 34.525 on Thursday (-0.70 pct) 
 Crown/dollarb  26.885 vs 26.768 (-0.40 pct) 
5-yr govt bond  yield 4.308/3.907 vs 4.346/4.107 
7-yr govt bond  yield 4.340/4.140 vs4.337/4.098 
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[BRATISLAVA/Reuters/Finance.cz]