Initially, it prolonged its previous drop touching 30.14. later on, the unit change direction and start to move south. It broke trough the key level 30.00 around noon. It could be only a coincidence, but at that time the Finance Ministry said demand largely overpass supply in government bond tender. In the afternoon, the koruna continue to rise, thus it closed at 29.90 zone in the end. As we wrote, there could be some positive influence of successful tender, but more important was likely improvement in the sentiment towards the whole region. Weak industrial output, namely 0.1 % y/y, only negligibly negatively affected the currency in the morning. The surprising decision of the Finance Ministry to raised issuance calendar for this quarter by one more auction of 10-year benchmark might be positive for the koruna, because it could imply lower issuance of government bonds in euros.
Today the calendar is empty, hence only foreign incentive may drive the market. The koruna might be a little bit nervous ahead a confidence vote in Parliament scheduled for tomorrow. Nevertheless, the government should win the vote. Thus the koruna may give up of some yesterday’s gains.
(CSOB - Investment research)