It opened at 28.52, so it was more than 1 % stronger in the afternoon. The unit slightly retreated at the en of the trading to close at 28.36. Regarding trading, the night successful vote on the Polish budget spurred the zloty and also the koruna in the morning. Thus the unit quickly broke through 28.50. Later on, the Finance ministry said that it issued 30-year state bonds in JPY. The tranche was rather small JPY 30 bn (CZK 6 bn), but the step was absolutely unexpected. The market immediately start to speculate about conversion of proceeds from the issue. Subsequently the koruna reached mentioned new high. In the end, the unit slightly retreated, as it rose deep into overbought territory.
Today the CNB’s policy meeting is an eye-catcher. We change our expectation and lean to the scenario that the bank may cut the rates. The key argument is a strong koruna. Therefore the koruna may be nervous in the morning. Traders may wait for an outcome from the meeting due in the afternoon. The press conference is scheduled in 15:30. The bank might act against the koruna, therefore we expect correction in the afternoon. However, if the bank stays on hold and even its wording on koruna is soft, it will shoot up again. Under such circumstances the next target is the 28.00 level.
(CSOB - Investment research)