The Czech koruna inched up to a new life-time high at EURCZK 28.525 yesterday. Nevertheless, it hovered in a pretty tight range of 28.54-28.60 for the most of the session. The market lacked any domestic incentive as in previous days. However, approval of the Polish state budget opened a room for further firming of the koruna. Therefore the unit reached the new high at the end of the European trading. south. A stronger zloty might be a key spur. However, traders may get nervous in the afternoon, as the policy meeting of the CNB is coming up. That’s almost sure, that the bankers will express its worry about the strong koruna tomorrow. Moreover, they may warn the market, that an intervention is a regular measure of the central bank against excessive volatility of the koruna. They also could disturb the market by warning that interest rates may even go lower. Nevertheless, we expect only a verbal intervention now. All in all, the koruna may break through the 28.50 level this morning.
(CSOB - investment research)