The koruna had a relatively dramatic week, full of events.
It opened last week’s trading at CZK 29.55 per EUR and
closed it only slightly stronger, at CZK 29.46 per EUR.
Nevertheless, quite dramatic fluctuations, which occurred
during the week, are hidden behind this moderate overall
appreciation. The koruna was stirred up the most on
Tuesday, when it rapidly firmed by 0.6% to a two-and-ahalf-
year high of CZK 29.30 per EUR. The overall upbeat
mood in the whole region pushed the Czech currency to
stronger levels, just as in previous weeks. Tuesday’s fall of
the dollar against global currencies and speculations on the
inflow of euros from the government Eurobond issue also
encouraged the appreciation. We have seen many times that
the Central-European currencies benefit from every major
fall of the dollar, and this was also true last week. Hitting a
new high made Thursday’s meeting of the central bank
dramatic. The agenda of the meeting did not originally
include monetary issues. However, the market was afraid,
and its concern was well-founded, that the bank might carry
out a move against the koruna. This was one of the reasons
why the koruna weakened quite dramatically on Thursday.
However, the fall of the Polish zloty, which was affected by
political uncertainty, was probably a more important reason
for this correction. Finally, some investors obviously took
profits from the previous appreciation of the koruna. Thus
practically none of the numerous economic indicators
released last week influenced the market in the end.
This week’s trading on the foreign-exchange market should
be calmer than last week. The calendar of events includes
practically no economic indicator releases; therefore the
koruna should be particularly at the mercy of neighbouring
Central-European markets. The Polish zloty in particular,
which has come under pressure due to sales of the Polish
currency, should counteract the appreciation of the koruna
now. Thus the koruna will probably stagnate within the
bounds of ….
(CSOB - Investment research)