On Monday, the Central European currencies edged a bit lower. The Hungarian forint
hit EUR/HUF 280 in a thin trade (due to national holiday), the zloty
and the koruna
posted only negligible losses.
We think that the koruna
might be under continuing modest pressure in weeks ahead; first, dovish mood prevailing in the Czech National Bank’s board is obvious and some central bankers (e.g. Kamil Janacek) even openly talk about another rate cut. Second, growing political uncertainty fuelled by the upcoming government confidence vote (following the ODS and TOP 09 loss in municipal and senate elections) might also weigh on investors’ sentiment. Technically speaking, the koruna
might test EUR/CZK 25.0 (psychological level) or 25.08 (200 days average).
The Czech FinMin Kalousek said yesterday that the Ministry was going to sell 10 - 20 billion of retail bonds maturing in 1.5 to 7 years on 12th December. Although the demand might be strong (offered yields exceed market rates), we do not expect significant impact of the emission on the secondary government bond market.