* Czech crown jumps after CNB scraps currency cap
* Crown on track for biggest one-day rise in 5-1/2 years
* Euro falls on dovish Draghi comments
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, April 6 The Czech crown surged almost
1.5 percent to its highest level against the euro since November
2013 on Thursday, after the country's central bank scrapped the
cap on the currency it had in place for 3-1/2 years.
Investors had been alert to the possibility that the Czech
National Bank could end the intervention regime that has kept
the crown on the weak side of 27 per euro as soon as Thursday,
meaning the fallout from the move was relatively limited, with
little spillover into other currencies and markets.
The crown, though, was on track for its biggest one-day rise
against the euro since October 2011, having
see-sawed after the announcement - first rising sharply, then
falling back, then surging again. Against the dollar, it jumped
By 1150 GMT it was trading at 26.70 crowns per euro, up 1.3
percent on the day, having weakened to 27.16 crowns in the
minutes following the announcement.
The central bank reiterated it would be ready to step into
the market if it needed to smooth excessive currency swings,
though it has said it would not reveal any potential
While some traders and strategists speculated that the CNB
might already be intervening, ING's head of rates and currency
strategy in London, Petr Krpata, said that was unlikely at the
"We think the CNB would only intervene if you saw excessive
moves, like around 10 percent," he said. "They'll be very
comfortable about a trading range of between 1.25 and 1.29
(crowns per euro), so we don't think they're intervening."
The CNB's balance sheet showed on Thursday that the central
bank's foreign assets - which serve as a rough guide to the
bank's purchases of foreign currency - had grown by 8.5 billion
euros in March.
The fact that the CNB would not be buying so many euros from
now on would not be enough to pull down the euro against any
currency other than the Czech crown given the size of the $5
trillion-a-day currency market, said Sandra Strissler, an
emerging markets currency strategist in Frankfurt.
"It's a small market; it's not very deep, so the reaction
will be limited," she said.
COLD WATER FROM DRAGHI
The euro edged down to $1.0659, close to a three-week
low hit earlier after the head of the European Central Bank said
he saw no need to deviate from the ECB's policy path, which
includes record-low interest rates and bond-buying until at
least the end of the year.
The single currency had jumped above $1.09 in March
for the first time since early November, after ECB chief Mario
Draghi signalled a diminishing urgency for expansionary policy,
with investors moving to price in a chance of an interest rate
hike in early 2018.
But ECB policymakers have since indicated that markets moved
too far in pricing in policy tightening.
Draghi continued in that vein on Thursday, saying that
before altering its policy stance, the ECB must have sufficient
confidence that inflation would return to target over a
medium-term horizon, even when the central bank's expansionary
policy was scaled back.
"Draghi made it very clear that he’s not intending any
change in the forward guidance, that policy still needs to
remain expansionary for a very long time, and the more positive
outlook depends on this expansionary stance," said Commerzbank
currency strategist Esther Reichelt, in Frankfurt.
For Reuters Live Markets blog on European and UK stock
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(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by