Czech RepublicThe Czech koruna is extending its losses as the prospect for rate hikes remains subdued and as ongoing uncertainty surrounding the euro zone economy is weighing on the currency. Meanwhile Czech CDS and asset-swap spreads remained elevated too as foreign investors have gradually reduced positions in Czech government bonds. We don’t expect an immediate positive outcome of the debt talks in the EMU. If so, peripheral bond markets will be waiting in vain for a European panacea and spreads will stay at elevated levels. In this context, Czech markets might continue to trade in a defensive mode. In case of the Czech koruna it might mean that the EUR/CZK pair will be heading towards the 25.0 level.HungaryForint at new 1-month low despite strong demand The Hungarian forint set a new 1-month low again this morning at 270.50/€ as risk aversion was on the rise. High-yielding currencies continue to suffer from risk aversion mainly caused by the fears from the euro zone debt crisis. This is a bit surprising as bond auctions saw strong demand yesterday. The 3-, 5- and 10-year bond auctions had bid/cover ratios above 2.0 and the agency was able to raise the issued amount at the shortest maturity. The Swiss franc exchange rate also set a new historic high of 234.10, which could hurt banks’ profitability and may keep domestic demand depressed in the coming months.PolandThe debt crisis in eurozone peripheries continues to weigh on the Polish zloty. EUR/PLN cross rate failed to break back below 4.00 EUR/PLN. The initial positive reactions on the approval of the Italian austerity package waned later during the day. It is a clear indication that bearish sentiment is still in place and that we may see further weakness on the Polish markets in the days ahead. The lower than expected inflation continues to support Polish bonds despite rising CDS, but is not of much help to the Polish zloty, which is further pressured by declining money market yields.