The Czech koruna shot up yesterday, as gained almost one percent. The whole region moved up, but the koruna made the most. There is no clear reason for such price action. We can only speculate that domestic players are less pessimistic to the regional currencies than London investors, because London markets were closed yesterday due to holiday. Czech exporters likely found the level around 30.50, where the koruna opened, as attractive to hedge its future revenues. Thus the koruna waned out all losses, which made after surprising interest rate cut. Nevertheless, the market activity was really small. The market closed at low thirties.
The April central budget deficit which climbed to CZK 30.8 bn didn’t affect the market. Year-to-day deficit stay at CZK 22.5 bn, while the budget was at CZK 8.3 bn surplus in January-March period. The high deficit was caused by transfer of state subsidies to building saving system worth CZK 15.4 bn. Despite the swing into the deficit the state budget is in slight better condition than in the same period of the last year. Today, the markets might be little bit nervous ahead of FOMC decision. London traders are at their desks, but the biggest CE market, the Polish zloty, is closed today. Moreover, the koruna may find difficult to rise further. Thus it might hover in 30.25-40 range.
(CSOB - Investment research)