Last September in a high-profile call, ING had advised clients to position for a jump in the crown's value against the euro as the central bank prepared to scrap the 27 crowns per euro cap which was in place since late-2013.
But since the Czech central bank removed the cap in April, the currency has gained only 3.6 percent against the euro, contrary to some analysts' predictions that it would rise as much as 10 percent.
But the crown has struggled to break below 26.00 versus the euro, despite the Eastern European country's central bank embarking on an interest rate-hiking cycle <CZRP=>.
ING analysts Petr Krpata and Jakub Seidler told clients that speculative positioning on the crown had turned excessive and there was now limited upside to the crown.
"The short euro/crown spot party started in September 2016 as market participants pre-positioned for the central bank currency floor exit," they said, noting that the crown was struggling to rise "despite the Czech National Bank turning from arguably the most dovish into the most hawkish central bank".
"At current levels, we see a low risk reward in rolling the short euro/crown position over."
On Tuesday, the crown was trading at 26.09 to the euro, down around 0.1 percent on the day after central bank governor Jiri Rusnok said there was no need to rush with the next rate hike..
"With the market already pricing in one full 25 basis-point rate hike by the end of this year and around 60 bps by the end of 2018, the CNB would have to signal and deliver a much more hawkish tightening cycle to push euro/crown meaningfully lower," Krpata and Seidler added.
Non-residents' share of the Czech government bond market fell in July to 45.6 percent from a record high of 47.62 percent in the previous month, as some investors started pulling back from the trade.
(Reporting by Alexander Winning, editing by Louise Heavens)