Czech koruna initially sunk in step with the Polish zloty yesterday

Czech koruna initially sunk in step with the Polish zloty yesterday . Hence it touched EUR/CZK 29.64 in the morning, but it recovered rather quickly and erased all losses just before noon. Hence it traded roughly unchanged compare to Friday in the afternoon. There was no significant domestic event, which could have affected the market. A row in governing coalition hardly will lead to early election, moreover it doesn’t matter weather the polls will be at the end of the year or in regular date in June 2006.

Today morning the koruna continue to strengthen as it rose to 29.40, hence it’s obvious that there is little chance the koruna weaken significantly in consequence of slightly undesirable result of Polish election. The unit might trade sideways within the 29.30-29.60 band in days to come. However we put the risk the koruna may suffer higher volatility tomorrow, as domestic market will be closed. Thursday the meeting of the central bank might not affect the market, as no one expect any action.

(CSOB - Investment research)