The Czech koruna fell into sideways trading yesterday

Initially, it continued to lose ground and touched 30.41, the fresh three-month low. A quick rise of the US dollar was the key impetus for the pressure on all CE currencies in the morning. Nevertheless, all regional currencies bounced back, as the dollar slowly retreated from week-high in the afternoon. Thus the koruna closed little changed in the end. The atmosphere on the market is now negative, since the euro is under pressure of weak eurozone fundamentals and worries from result of the referendum in France. As we wrote many times the strong dollar is negative for emerging markets now. The market ignored resignation of Mr. Gross and appointment of new government with Mr. Paroubek as Prime Minister. The new government has to ask the Parliament for confidence by one month and there is a little chance that three SocDem’s MPs will not support the government.

Today the same atmosphere as yesterday may prevail, thus the koruna may hover in sideways range around EUR/CZK 30.30. No event is expected today.

(CSOB - Investment research)